Question

In: Finance

➤If you invest $10,000 at 10% per year on average, when will you (on average) have...

➤If you invest $10,000 at 10% per year on average, when will you (on average) have this grow to $40,000? When will it grow to $160,000?

Expert Solution

Time taken to grow with compound interest is the value of n in the following formula:

FV= P(1+r)^n

Where FV= Future Value, P= Present Value (given as $10,000), r= interest rate (given as 10%) and n= number of compounding period.

Case 1:

Given, FV= $40,000

Substituting the values,

40000=10000*(1+1)^n = 10000*1.1^n

1.1^n = 40000/10000= 4

Time required (n) = 14.54509 years

Calculation as follows:

Case 2:

Given, FV= $160,000

Substituting the values,

160000=10000*(1+1)^n = 10000*1.1^n

1.1^n = 160000/10000= 16

Time required (n) = 29.09018 years

Calculation as follows:

jeff jeffy answered 2 years ago

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