Solve the problem.
-What is the rate on an investment that doubles $9537 in 20 years? Assume interest is compounded quarterly.
A) 4.4%
B) 3.5%
C) 1.7%
D) 2.6%

Question

Quizplus · Accepted Answer

The formula for compound interest is $A = P(1 + \frac{r}{n})^{nt}$, where $A$ is the amount of money accumulated after n years, including interest, $P$ is the principal amount (the initial amount of money), $r$ is the annual interest rate (decimal), $n$ is the number of times that interest is compounded per year, and $t$ is the time the money is invested for in years. To find the rate that doubles the investment, set $A = 2P$, and solve for $r$. Given $P = 9537$, $A = 2 \times 9537$, $n = 4$ (since interest is compounded quarterly), and $t = 20$, we get $2 = (1 + \frac{r}{4})^{80}$. Solving for $r$ gives an approximate rate of 3.5%.

Solve the Problem. -What Is the Rate on an Investment That Doubles $9537