Helen is saving to start a business.If she invests $10,000 in a savings account now,which of the following is the minimum interest rate required to ensure that she has $25,000 in her account in ten years time?
A)2.5%
B)6.4%
C)9.6%
D)10.2%
E)8.7%

Question

Quizplus · Accepted Answer

To find the interest rate required, we can use the compound interest formula:

Future Value = Present Value x (1 + interest rate)^time

Plugging in the given values, we get:

$25,000 = $10,000 x (1 + interest rate)^10

Simplifying, we get:

(1 + interest rate)^10 = 2.5

Taking the 10th root of both sides, we get:

1 + interest rate = 1.096

Subtracting 1 from both sides, we get:

interest rate = 0.096 = 9.6%

Therefore, the minimum interest rate required to reach $25,000 in 10 years is 9.6%.

Helen Is Saving to Start a Business