Question

In: Finance

How long does it take to double your money if you can earn 16%per year...

How long does it take to double your money if you can earn 16% per year if the interest rate is compounded quarterly?

Solutions

Expert Solution

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


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