Question

How many years will it take for $136,000 to grow to $468,000 if it is invested in an account with an annual interest rate of 8%?

Answer 1

=21.29%(Approx).

Explanation:

We use the formula:

A=P(1+r/100)^n

where

A=future value

P=present value

r=rate of interest

n=time period.

a.

468,000=136,000*(1.08)^n

(468,000/136,000)=(1.08)^n

Taking log on both sides;

log (468,000/136,000)=n*log 1.08

n=log (468,000/136,000)/log 1.08

=16.06 years(Approx).

b.

475,000=10,000*(1+r/100)^20

(475,000/10,000)^(1/20)=(1+r/100)

(1+r/100)=1.2129

r=1.2129-1

=21.29%(Approx).