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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
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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.

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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
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2.8k points