Question

24

At a growth (interest) rate of 9 percent annually, how long will
it take for a sum to double? To triple? Use Appendix A for an
approximate answer, but calculate your final answer using the
formula and financial calculator methods. **(Do not round
intermediate calculations. Round your final answers to 2 decimal
places.)
**

Answer #1

a.We use the formula:

A=P(1+r/100)^n

where

A=future value($2x)

P=present value($x say)

r=rate of interest

n=time period.

2x=x*(1.09)^n

2=(1.09)^n

Taking log on both sides;

log 2=n*log (1.09)

n=log 2/log (1.09)

=**8.04 years(Approx).**

b.We use the formula:

A=P(1+r/100)^n

where

A=future value($3x)

P=present value($x say)

r=rate of interest

n=time period.

3x=x*(1.09)^n

3=(1.09)^n

Taking log on both sides;

log 3=n*log (1.09)

n=log 3/log (1.09)

=**12.75 years(Approx).**

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