Question

If you received a constant annual rate of return of 7% on an investment of $10,000, how many years will it take before you have $20,000?5

Answer 1

It will take 10 years to have $20,000 on investment of $10,000.

Step-by-step explanation:

Annual Rate of return = r = 7%

Compounded Value / Future Value = FV = $20,000

Investment Value / Present Value = PV = $10,000

Use Future value formula to solve this question:

Future Value = Present Value x ( 1 + Number of Year )^Number of year

FV = PV x
`( 1 + r )^(n)`

$20,000 = $10,000 x
`( 1 + 0.07 )^(n)`

`(20,000)/(10,000)` =
`( 1 + 0.07 )^(n)`

$2 =
`1 .07 ^{n`

Log 2 = n log 1.07

0.30 = n x 0.03

n =
`(0.30)/(0.03)`

n = 10.00

n = 10 year (rounded off to nearest year )

It will take 10 years to have $20,000 on investment of $10,000.