A financial institution offers a "double-your-money" savings account in which you will have $2 in 6...
A financial institution offers a "double-your-money" savings account in which you will have $2 in 6 years for every dollar you invest today. What stated annual interest rate (assuming semi-annual compounding) does this account offer? Please specify your answer in decimal terms and round your answer to the nearest thousandth (e.g., enter 12.3 percent as 0.123).
Homework Answers
Semiannual compounding is there
So no of periods of compounding in 6 years(n)=
6*2= 12
Amount invested (present value)= $1
Future value= $2
rate of return formula =( (future value/present value)^(1/n))
-1
((2/1)^(1/12))-1
0.05946309436
Annual rate =Semiannual Rate*2
0.05946309436 *2
0.1189261887
So stated annual rate is 0.1189 compounded semiannually
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