Question

It will take _____ years to have a 112% return on your saving account if the interest rate is 1.52%, compounded annually, _____ years if the interest rate is 1.58%, compounded monthly and _______years if the interest rate is 1.45%, compounded daily.

Answer 1

1. Future Value = Present Value * (1 + Interest)^Years

1.12 = (1 + 1.52%)^Years

Apply Log on both sides

Log 1.12 = Years * Log(1.0152)

Years = 7.51 Years

2. Future Value = Present Value * (1 + Interest)^Years

1.12 = (1 + 1.58%/2)^(Years*12)

Apply Log on both sides

Log 1.12 = (Years*12) * Log(1.0152)

Years*12 = 86.13

Years = 7.18 Years

3. Future Value = Present Value * (1 + Interest)^Years

1.12 = (1 + 1.45%/365)^(Years*365)

Apply Log on both sides

Log 1.12 = (Years*365) * Log(1.0000397)

Years*365 = 2852.81

Years = 2852.81 / 365

Years = 7.82 Years

It will take 7.51 years to have a 112% return on your saving account if the interest rate is 1.52%, compounded annually, 7.18 years if the interest rate is 1.58%, compounded monthly and 7.82 years if the interest rate is 1.45%, compounded daily.