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

Answer:

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

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 $( 1 + 0.07 )^{n}$

$\frac{20,000}{10,000}$ = $( 1 + 0.07 )^{n}$

$2 = $1 .07 ^{n$

Log 2 = n log 1.07

0.30 = n x 0.03

n = $\frac{0.30}{0.03}$

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.