Question

How many years (and months) will it take $2 million to grow to $6.20 million with an annual interest rate of 7 percent? (Do not round Intermediate calculations. Round "months" to 1 decimal place.) Period years months

Answer 1

Here we will use the following formula:

FV = PV * (1 + r%)ⁿ

where, FV = Future value = $6.2m, PV = Present value = $2m, r = rate of interest = 7%, n= time period

now, putting theses values in the above equation, we get,

$6.2 = $2 * (1 + 7%)ⁿ

$6.2 = $2 * (1 + 0.07)ⁿ

$6.2 / $2 = (1.07)ⁿ

$3.1 = (1.07)ⁿ

($1.07)^16.72 = 1.07

n = 16.72 years

So, it will take 16.72 years.

This will mean that it will take:

Years = 16

and

Months = 0.72 *12 = 8.6 months.