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1 November, 00:37

If you deposit $1,000 into a savings account that pays you 5% interest per year, approximately how long will it take to double your money? If you deposit $1,000 into a savings account that pays you 5% interest per year, approximately how long will it take to double your money?"

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  1. 1 November, 01:16
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    It will take 14 years.

    Explanation:

    Imagine you are Julie at year cero about to purchase eleven acres of land. The seller tells you that in X amount of years it will value $34686 because it increases 5% each year. He also tells you that according to the Present Value formula, the eleven acres are worth today $15890.

    The formula is:

    PV=Ct/[ (1+r) ^n]

    Ct = cash flow at t time

    r = rate

    n = period of time

    To calculate how many years it will be worth $34686 you need to isolate n from the PV formula

    n=[ln (Ct/PV) ]/ln (1+r)

    n=ln (34686/15890) / ln (1+0,05)

    n=16

    Giving the following information, we need to calculate how many years will take to the investment to duplicate:

    I = $1000

    I=5%

    To calculate we are going to use the Present value formula:

    PV=Ct/[ (1+r) ^n]

    Ct = cash flow at t time

    r = rate

    n = period of time

    To calculate how many years it will take to duplicate we need to isolate n from the PV formula

    n=[ln (Ct/PV) ]/ln (1+r)

    n=ln (2000/1000) / ln (1+0,05)

    n=14
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