Answer:
Compounding interest rate, r = 10.41%
Explanation:
As the investment will be doubled after 7 years from now, the future value of the current investment will be = $10,000 × 2 = $20,000
Therefore,
Number of periods (years), n = 7
Future value, FV = $20,000
Principal = Present Value, PV = $10,000
we have to determine the compounding interest rate, r.
We know,
r = [tex][(\frac{FV}{PV})^{\frac{1}{n}} - 1][/tex]
Putting the values into the formula, we can get,
r = [tex][(\frac{20,000}{10,000})^{\frac{1}{7}} - 1][/tex]
or, r =[tex](2^{\frac{1}{7}} - 1)[/tex]
With the help of calculator, we can find the value of [tex]2^{\frac{1}{7}}[/tex] = 1.1041
or, r = (1.1041 - 1)
or, r = 0.1041
Therefore, interest rate = 10.41%
