Question

Problem 5.16 You invest $270 in a mutual fund today that pays 9.40 percent interest annually. How long will it take to double your money? (If you solve this problem with algebra round intermediate calculations to 6 decimal places, in all cases round your final answer to O decimal place, eg. 545) Number of years

Answer 1

Using financial calculator

PV= -270

I/Y = 9.4%

FV= 270*2 = 540

Find N

N = 7.7153 = 8 years (rounded off)

USing excel, we can find the term as

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Answer 2

SOLUTION :

FV / PV = (1 + r)^n

=> 2 = (1 + 0.094)^n = 1.094^n 

Taking log :

log(2) = n log(1.094)

=> n = log(2)/log(1.094)

=> n = 7.714 years (ANSWER)