Question

Answer the following:

Approximately how many years are needed to double a $500 investment when the interest rates are 10.75 percent per year? (Round your answer to 2 decimal places)

Period......................years.

Answer 1

Present Value (PV) = 500

Future Value (FV) = 1000

Rate of return (r) = 10.75%

Time (n) =???

We can use this formula to find n

FV = PV *(1+r)^n

But this is long method

Instead of this, Use nper() FUNCTION in excel. This will give you the time required.

PV - present value (use negetive sign in front of PV since it is an investment)

FV - Future valueIn our case, put PMT = 0 since no coupon is there

RATE - interest rate

PMT - coupon payment = 0 in our case

So using nper function,

Time = 6.79 years