Question

Arnold learned something very valuable as a teenager from his dad. He was told to invest​ $1,000 at​ 12% interest at age 20 and leave it alone until age 65.​ Arnold's dad knew that one strategy that wealthy people use is to exercise selfminusdiscipline to never touch this longminusterm plan. Arnold is very happy he applied his​ dad's advice. Approximately how long will it take​ Arnold's savings to grow into​ $2,000?

Answer 1

The investment of $1000 that yields 12% interest per year would become $2000 in 6 years' time as shown by the calculation below

Step-by-step explanation:

In determining the how long it would take for the investment to become $2000, the future value formula stated below is used.

FV=PV*(1+r)^N

FV is the $2000

PV, present value is $1000

r is the rate of return at 12%

2000=1000*(1+0.12)^N

2000/1000=1.12^N

2=1.12^N

by taking log of both sides the equation becomes

ln 2=N ln 1.12

N= ln 2/ln 1.12

N=6.116255374

approximately N is 6 years