Question

You deposit $50,000 into a saving account. What nominal rate of interest do you need to earn for that money to grow to $100,000 over 10 years, if that interest rate is compounded annually?Answer as%, to three decimal places, i.e. x.xxx%.

Answer 1

Amount invested in savings account = $50,000

Future accumulated value in 10 years = $100,000

Calculating the Nominal rate of Interest that would be earned to accumulated the amount:-

Where,

r = Interest rate

n= no of years = 10

m = no of times compounding in a year = 1 (compounded annually)

Taking 10-root on both sides,

1.071773 = (1+r)

r = 7.177%

So, nominal rate of interest do you need to earn is 7.177%

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