Question

A financial institution offers a "double-your-money" savings account in which you will have $2 in 9 years for every dollar you invest today. What annual interest rate does this account offer?

Answer 1

Answer:

The annual interest rate is 8 %. ( approx )

Explanation:

Since, the future value of an investment,

$A=P(1+r)^t$

Where,

P = invested amount,

r = rate per period,

t = number of periods,

Here, A = $ 2, P = $ 1, t = 9,

$\implies 2 = (1+r)^9$

$\implies r=0.08005973\approx 0.08$

Hence, the annual rate of interest is approximately 8 %.