In: Finance
How long will it take $100 to double if it earns the following rates? Compounding occurs once a year. Round each answer to two decimal places.
6%.= year(s)
9%.= year(s)
21%. = year(s)
100%= . year(s)
He wants to double the principal amount at diff int rates
If Int rate is 6%:
Amount = Principal ( 1 + r )n
where r is interest rate & n is no. of years
$ 200 = $ 100 ( 1 + 0.06 )n
2 = (1.06)n
Take Logarithm on both sides
Log 2 = n * Log 1.06
n = Log 2 / Log 1.06
= 0.3010 / 0.0253
= 11.90 years
If Int rate is 9%:
Amount = Principal ( 1 + r )n
where r is interest rate & n is no. of years
$ 200 = $ 100 ( 1 + 0.09 )n
2 = (1.09)n
Take Logarithm on both sides
Log 2 = n * Log 1.09
n = Log 2 / Log 1.09
= 0.3010 / 0.0374
= 8.05 years
If Int rate is 21%:
Amount = Principal ( 1 + r )n
where r is interest rate & n is no. of years
$ 200 = $ 100 ( 1 + 0.21 )n
2 = (1.21)n
Take Logarithm on both sides
Log 2 = n * Log 1.21
n = Log 2 / Log 1.21
= 0.3010 / 0.0828
= 3.64 years
If Int rate is 100%:
Amount = Principal ( 1 + r )n
where r is interest rate & n is no. of years
$ 200 = $ 100 ( 1 + 1 )n
2 = (2)n
2 = (2)1
Thus n is 1 year