Question

# How long will it take \$800 to double if it earns the following rates? Compounding occurs...

How long will it take \$800 to double if it earns the following rates? Compounding occurs once a year. Round each answer to two decimal places.

8%.

year(s)

12%.

year(s)

19%.

year(s)

100%.

year(s)

We use the formula:
A=P(1+r/100)^n
where
A=future value(\$1600)
P=present value
r=rate of interest
n=time period.

1.

1600=800(1.08)^n

(1600/800)=1.08^n

2=1.08^n

Taking log on both sides;

log 2=n*log 1.08

Hence n=log 2/log 1.08

which is equal to

=9.01 years(Approx)

2.

1600=800(1.12)^n

(1600/800)=1.12^n

2=1.12^n

Taking log on both sides;

log 2=n*log 1.12

Hence n=log 2/log 1.12

which is equal to

=6.12 years(Approx)

3.

1600=800(1.19)^n

(1600/800)=1.19^n

2=1.19^n

Taking log on both sides;

log 2=n*log 1.19

Hence n=log 2/log 1.19

which is equal to

=3.98 years(Approx)

d.

1600=800(1.2)^n

(1600/800)=1.2^n

2=1.2^n

Taking log on both sides;

log 2=n*log 1.2

Hence n=log 2/log 1.2

which is equal to

=1 year.

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