Question

You invest $20,000 in an account offering 2.54% interest. How long will it take to double your money (have $40,000)A. 4 yearsB. 10 years C. 20 years D. 28 years

Answer 1

Using future value formula:

`FV=PV(1+r)^t`

Where:

FV = Future value = $40000

PV = Initial investment = $20000

r = Interest = 2.54% = 0.0254

t = time

so:

`40000=20000(1+0.0254)^t`

solve for t:

`\begin{gathered} (40000)/(20000)=1.0254^t \\ 2=1.0254^t \\ \ln (2)=t\cdot\ln (1.0254) \\ t=(\ln (2))/(\ln (1.0254)) \\ t=27.63438384 \\ t\approx28 \end{gathered}`

Answer:

D. 28 years