Question

A bank account has an initial deposit of $14,000. After 8 years, the bank account

has $18,000. Assuming that compounding interest is done annually and that no
withdrawals are taken, find the annual interest rate on the investment. If the interest is compounded annually what is the approximate interest rate on the investment?

Answer 1

2.3%

Explanation:

18000 = 15000( 1 + i)^8

Divide both sides by 15000

1.2 = (1 + i)^8

Take both sides to the 1/8 power

1.2^(1/8) = 1 + i

1.023051875220463 = 1 + i

Subtract 1 from both sides

i = 0.023051875220463

~ 2.3%