Answer to Question #134081 in Economics for Melody

Question

A certain amount of money doubles after 9 years. Determine its effective interest.

Answer 1

The precise formula for calculating the exact doubling time for an investment earning a compounded interest rate of r% per period is as follows:

$T=\frac{ln2}{ln(1+\frac{r}{100})}≈\frac{72}{r}$

where: T=Time to double;

ln⁡=Natural log function;

r=interest rate per period

≈Approximately equal to

$9=\frac{72}{r}$

$r=\frac{72}{9}=8$