Question

Assume your granny put $45,000 into a trust fund for you earning 5%. You cannot withdraw the money until it has doubled. How many years must you leave the money in the trust fund (before the original $45,000 has doubled)?

a. 10.24
b. 11.35
c. 12.23
d. 13.12
e. 14.21

Answer 1

E) $14.21 years

Step-by-step explanation:

We need to find the number of years it will take your trust fund to reach $90,000.

To find out, we use this equation:

PV = FV (1 + i)^X

Where:

PV = Present value of money (in this case $45,000)

FV = Future value of money (in this case $90,000)

i = Interest rate

X = number of compounding periods (in this case, number of years)

Now, we plug the amounts into the equation and solve:

$45,000 = $90,000 (1 + 0.05)^X

$45,000/$90,000 = 1.05^X

0.5 = 1.05^X

Log0.5 = Log1.05X

X = Log0.5 / Log 1.05

X = 14.21