Question

Approximately how many years would it take for your money to double in a bank account that pays @ 0.1% per year?

A. 35 years

B. 40 years

C. 7,200 years

D. 18 years

Answer 1

F = Future value

P = Present value

i = is the annual interest rate divided by the number of compounding periods per year. So, if compounding is done 4 times per year, r is annual interest rate, then i = r/4

n = the number of periods . So, if compounding is done 4 times per year, t is the number of years, then n = 4*t

F = P * (1+i)^n

Here,

r = 0.1%

t = no of years for money to double

P = $100 (assume)

F = $200 (assume)

Assuming quarterly interest rate,

200 = 100 * (1+r/4)^(t*4)

200 = 100 * (1+0.1%/4)^(t*4)

solving for t, we get t = ~700