Question

Tom invested $10,000 at a rate of 6% compounded annually. How long will it take for the investment to grow to $40,000?

1.33 years

4.00 years

23.79 years

50.00 years

Answer 1

We use the formula:  
A=P(1+r/100)^n
where   
A=future value
P=present value  
r=rate of interest
n=time period.

40,000=10,000*(1.06)^n

(40,000/10,000)=(1.06)^n

Taking log on both sides;

log (40,000/10,000)=n*log 1.06

n=log (40,000/10,000)/log 1.06

=23.79 years(Approx)