Answer:
Required rate of interest is 9%
Explanation:
Future value is the sum of value of principal invested and compounded return received over the investment period.
Using following formula of future value to calculate the required interest rate.
FV = PV x ( 1 + r )^n
FV = Future value = $4,000
PV = Present value = $2,000
n = number of years = 8 years
r = Interest rate = ?
$4,000 = $2,000 x ( 1 + r )^8
$4,000 / $2,000 = ( 1 + r )^8
2 = ( 1 + r )^8
( 2 )^1/8 = ( ( 1 + r )^8 )^1/8
1.0905 = 1 + r
r = 1.0905 - 1
r = 0.0905
r = 9.05% = 9%
