EXPONENTIAL FUNCTIONS Compound Interest (Page 5 of 5)

Finally, let's find the interest rate necessary for $500 to double in six years assuming interest is compounded monthly. Enter A=1000, P=500, N=12 and T=6. Then move the cursor to the line for R. Enter a guess for R. We will try 0.10 (10%). Do not press ENTER! Leave the cursor on this line and press ALPHA SOLVE.

6 Up arrow key. Up arrow key.

ALPHA SOLVE key.

 Calculator screen image. Calculator screen image.

The value that appears next to R after doing this is the solution to the equation. Therefore, the interest rate required for the principle to double in six years is approximately 11.6 %. We could also use the SOLVER to solve for P or N given values for the other four variables.
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