## Related questions with answers

Question

a. At what interest rate, compounded annually, would you need to invest $500 in order to have$625 in 2 years? b. At this interest rate, how long would it take for your $500 to double in value?

Solution

VerifiedAnswered 1 year ago

Answered 1 year ago

Step 1

1 of 4a) Let's start, by remember that the formula to determine the future amount of money for certain investment with compound interest is:

$\tag{1}F V=P V\left(1+\frac{r}{k(100)}\right)^{k n}$

where $F V$ is the amount after $n$ years, $P V$ denotes the actual amount, $r$ denotes the rate and $k$ denotes how many compounding periods will be considered per year.

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