Question

How long you need to wait to make $3,000 grow to $6,000 if you can earn 10% on your money?

Answer 1

Sol:

Present value (PV) = $3,000

Future value (FV) = $6,000

Interest rate (r) = 10%

Period (n)

To determine how long it will take the money to double we can use rule 72.

As per rule 72, If an investment scheme promises a 10% annual compounded rate of return, it will take approximately (72 / 10) = 7.2 years to double the invested money.

Time to double (T) = ln(2) / In(1+ r​) ​≃72​/10

Time to double (T) = ln(2) / In(1+10%​)

Time to double (T) = ln(2) / In(1.10​) = 7.2725 ​ or ≃72​/10

Future value (FV) = PV x (1+r)^n

FV = 3000 x (1+10%)^7.2725

FV = 3000 x (1.10)^7.2725 = $5,999.9766 rounded off to $6,000

Therefore it will take approximate 7 years and 2 months to double your money.