Question

A recent advertisement in the financial section of a magazine carried the following claim: "Invest your money with us at 14 percent, compounded annually, and we guarantee to double your money sooner than you imagine." Ignoring taxes, how long would it take to double your money at a simple rate of 14 percent, compounded annually?

Answer 1

Time period will be 5.28 year

Step-by-step explanation:

We have given rate of interest r = 14 % = 0.14

Let the principal amount is P

It is given that amount will be double

So future value A = 2 P

Let the time period is n

We know that future value is given by

`A=P(1+r)^n`

`2P=P(1+0.14)^n`

`2=(1+0.14)^n`

`2=1.14^n`

Taking log both side

`log2=nlog1.14`

`n* 0.056=0.3010`

n = 5.289 year