509,165 views
28 votes
28 votes
If a $500 investment receives 4% interest per year, how long will it take for the investment to double? Pls help

User Andrea Sindico
by
2.5k points

2 Answers

15 votes
15 votes

Answer:

It will take 25 years

User Ragnarokkr
by
2.8k points
20 votes
20 votes

Answer:

25 years

Explanation:

Assuming the interest is simple interest, the amount of it is given by ...

I = Prt . . . . . interest on principal P at rate r for t years

You want to find t such that I = P: the amount of interest is equal to the principal.

500 = 500(0.04)(t) . . . . put the known values into the formula

500/20 = t = 25

It will take 25 years for the investment to double.

__

Additional comment

If interest is compounded annually, the account value is ...

A = P(1 +r)^t

For A = 2P, this becomes ...

2 = (1 +0.04)^t

t = log(2)/log(1.04) ≈ 17.7

It would take about 17.7 years for the investment to double if interest is compounded annually.

User Sladix
by
2.8k points
Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.