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25 January, 17:30

A financial institution offers a "double-your-money" savings account in which you will have $2 in 11 years for every dollar you invest today. What stated annual interest rate (assuming monthly compounding) does this account offer

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  1. 25 January, 19:46
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    The correct answer is 0.06317911524 or 6.3%.

    Explanation:

    According to the scenario, the given data are as follows:

    FV = $2

    PV = $1

    Time period (t) = 11 years

    So, we can calculate the rate of interest by using following fomula:

    FV=PV (1 + r : 12) ^12t

    By putting the value, we get

    $2 = $1 (1 + r : 12) ^ (12 * 11

    $2^ (1 : 132) = 1 + r : 12

    r : 12 = (1.00526492627 - 1)

    r = 0.00526492627 * 12

    = 0.06317911524 or 6.3%
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