Question

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You are promised to double your investment in 4 years. What rate of interest per year...

You are promised to double your investment in 4 years. What rate of interest per year are you being promised?

Group of answer choices

18.92%

Need more information

15.78%

24.75%

Expert Solution

Since the amount doubles, the future value is twice of the present value

Lets assume that PV = $1

This means that FV should equal $2

N = 4 years

FV = PV * (1 + Rate^N

2 = 1 * (1 + Rate)^4

(1 + Rate)^4 = 2

(1 + Rate) = 2 ^(1/4)

(1 + Rate) = 1.1892

Rate = 1.1892 - 1

= 18.92%

Correct choice A

jeff jeffy answered 2 years ago

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