In: Finance
Kari would like to save $10,000 for a down payment on a house. Illustrate the difference in years it will take her to double her current $5,000 savings,
$5000 invested today at 6% would be worth $10000 in ? years.
$5000 invested today at 12% would be worth $10000 in ? years.
$5000 invested today at 18% would be worth $10000 in ? years
We use the
formula:
A=P(1+r/100)^n
where
A=future value
P=present value
r=rate of interest
n=time period.
10000 = 5000 ( 1+ 6/100) ^ n
2 = (1+6/100) ^n
or 2 = (1.06) ^ n
Taking log on both sides we get,
log 2 = n log (1.06)
Hence, n = Log 2 / log (1.06)
or n = 11.8957 years
Hence the correct answer is 11.90 years.
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We use the
formula:
A=P(1+r/100)^n
where
A=future value
P=present value
r=rate of interest
n=time period.
10000 = 5000 ( 1+ 12/100) ^ n
2 = (1+12/100) ^n
or 2 = (1.12) ^ n
Taking log on both sides we get,
log 2 = n log (1.12)
Hence, n = Log 2 / log (1.12)
or n = 6.12 years
Hence the correct answer is 6.12 years.
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We use the
formula:
A=P(1+r/100)^n
where
A=future value
P=present value
r=rate of interest
n=time period.
10000 = 5000 ( 1+ 18/100) ^ n
2 = (1+18/100) ^n
or 2 = (1.18) ^ n
Taking log on both sides we get,
log 2 = n log (1.18)
Hence, n = Log 2 / log (1.18)
or n = 4.19 years
Hence the correct answer is 4.19 years.