Problem 5-7 Calculating the Number of Periods [LO4]
At 7 percent interest, how long does it take to double your money? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
At 7 percent interest, how long does it take to quadruple it? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
a. The time period is computed as follows:
Future value = Present value x (1 + r)^{n}
2 = 1 x (1 + 0.07)^{n}
2 = 1.07^{n}
Take log on both sides, we shall get:
log 2 = n log 1.07
0.693147181 = n x 0.067658648
n = 0.693147181 / 0.067658648
n = 10.24 years Approximately
b. The time period is computed as follows:
Future value = Present value x (1 + r)^{n}
4 = 1 x (1 + 0.07)^{n}
4 = 1.07^{n}
Take log on both sides, we shall get:
log 4 = n log 1.07
1.386294361 = n x 0.067658648
n = 1.386294361 / 0.067658648
n = 20.49 years Approximately
Get Answers For Free
Most questions answered within 1 hours.