Question

A financial institution offers a "double-your-money" savings account in which you will have $2 in 11 years for every dollar you invest today. What annual interest rate does this account offer? Please specify your answer in decimal terms and round your answer to the nearest thousandth (e.G., enter 12.3 percent as 0.123).

Answer 1

`r=0.07`

Explanation:

From the question we are told that

An offer of 2$ in 11 years on every dollar

Generally we make use of this formula

`F=P(1+r/100)^t`

where

`f=Future value`

`P= present value`

`r=Rate`

`t=time`

Mathematically solving for the rate

`2=1(1+r/100)^1^1`

`(2)^1^/^1^1=(1+r/100)`

`(1+r/100=1.0650`

`r=(1.0650-1) *100`

`r=0.07`

Generally this shows that the account give an annual rate of 0.07