Question

Naomi invested $4000 into a fund that is expected to grow by 5.53% per year. How long will it take the fund to be worth $8000?

A) about 5.5 years
B) about 7.5 years
C) about 11 years
D) about 13 years

Answer 1

Assuming that this is a compounding interest rate, we use the future value formula which is expressed as: F = P ( 1 + i )^n where F is the future value, P is the present value, i is the interest rate and n is the compounding periods. We do as follows:

F = P ( 1 + i )^n
8000 = 4000 ( 1 + 0.0553)^n
n = 12.88 yrs or about 13 years

Therefore, option D is the answer.