Multiple choice

Ana has invested $1000 in a savings account so that it would be doubled after 10 years. If the interest on the account is compounded annually, what annual interest rate is necessary for this to happen?

  1. 7.81%

  2. 7.17%

  3. 7.00%

  4. 6.97%
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

A = P(1 + r/100)^n. 2000 = 1000(1 + r/100)^10. 2 = (1 + r/100)^10. 1 + r/100 = 2^(1/10) approx 1.07177. r approx 7.17%.

AI explanation

For money to double in 10 years under annual compounding, the amount is 2000 and the principal is 1000. Using the compound interest formula 2000 equals 1000 times 1 plus R over 100 raised to the power of 10, we find 1 plus R over 100 equals the 10th root of 2, which is approximately 1.0717. Subtracting 1 and multiplying by 100 gives an annual interest rate of 7.17%.

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