In: Finance
How long does it take to double your money if you can earn 16% per year if the interest rate is compounded quarterly?
The number of years is computed as follows:
Future value = Present value x (1 + r)n
2 = 1 x (1 + 0.16 / 4) 4 x n
2 = 1.04 4 n
Take log on both sides, we shall get:
log 2 = 4n log 1.04
0.693147181 = 4n x 0.039220713
4n = 0.693147181 / 0.039220713
4n = 17.6729877
n = 4.42 years Approximately