Problem
If you deposit $1000 into an account paying 5% annual interest compounded yearly, how long until there is $2000 in the account?
Result
It wil take approximately 14 years 2 months and 15 days for the account to go from $1000 to $2000.
Step-by-step explanation
To find time we use formula:
A=P(1+rn)n⋅t
A = total amount
P = principal or amount of money deposited,
r = annual interest rate
n = number of times compounded per year
t = time in years
In this example we have
A=$2000 , P=$1000,r=5% and n=1
After plugging the given information
0.05 1·t 2000=1000 1+ 1
2000 = 1000 · (1.05)1·t (1.05)1·t = 2000
1000
(1.05)1·t = 2 Take the natural logarithm of both sides
ln 1.051·t = ln (2) 1 · t · ln (1.05) = ln (2)
1·t= ln(2) ln (1.05)
1 · t = 14.2067
t = 14.2067 years = 14 years 2 months and 15 days