Compound Interest

Question

An investor wants to double her money in 3 years. What annual interest rate, compounded quarterly, will enable her to do so? (See Example 8.) (Round your final answer to one decimal place.)

Answer 1

3 years is 12 quarters. If r = quarterly rate then (1+r)^12=2, doubling the amount invested.

So 1+r=2^1/12=1.05946, making r=5.946% or 4*5.946=23.8 percent annually.