An investor deposits $20,000 in a bank account that offers an APR 7.9% .How many years will take the investment to double ?

Answers

Answer 1

Answer:

The number of years it will take for the investment to double is approximately 9.1162 years (9 years, 1 month and 12 days)

Explanation:

The principal amount the investor deposits in the bank, P = $20,000.00

The annual percentage rate the bank applies to the principal, r = 7.9%

The amount, 'A', in the bank account after a given number of years, 't', is given as follows;

[tex]A = P \cdot \left(1 + \dfrac{r}{n} \right)^{n\cdot t}[/tex]

Where;

n = The number of times the interest rate is applied per time period = 1

When the investment (principal amount) doubles, we have;

A = 2·P

r = 0.079

P = $20,000

Plugging in the values into the equation that gives that amount in the account after 't' years, we get;

[tex]2\cdot P = P \cdot \left(1 + \dfrac{r}{n} \right)^{n\cdot t}[/tex]

[tex]2 = \left(1 + \dfrac{r}{n} \right)^{n\cdot t}[/tex]

[tex]2 = \left(1 + \dfrac{0.079}{1} \right)^{1\times t}[/tex]

[tex]\therefore 2 = \left(1 .079}{1} \right)^{ t}[/tex]

[tex]t = \dfrac{ln(2)}{ln(1.079)} =\dfrac{196372}{21541} \approx 9.1162 \, years[/tex]

Therefore, it would take t ≈ 9.1162 years for the investment to double


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