Question

An investment adviser has promised to double your money. If the interest rate is 7% a year, how many years will she take to do so? We have entered the data vou need in cells H9 to HI1: Present value (PV) Future value (FV) Interest rate (r) 1 2 0,06 You can use the present value formula to value an annuity You can either find the answer by taking logs of the present value formula or you can use Excel's built-in function for number of periods. Here is what you need to enter and the resulting answer. Using the formula for the present value PV-FV/(1+r)t t-In(2/1)yIn(1.06) -In(h10/h9)/In(1+H11) So t In(FV/PVVIn(1+r) Present value formula: To calculate: You need to enter Output 11.90 Using the Excel function for number of periods Function: You need to enter Output NPER(Rate, Pmt, Pv, Fv, Type) -NPER(HIL0H9,H10) 11.90 Notice: In this problem Pmt (the valuc of any regular paymient) is zero. Since the payment occurs at the end of the period, leave Type blank If you cannot remember the Excel function, you can pull down the present value function from Excel's built-in functions. The box below shows how you enter the inputs when prompted. Function Arguments RATE Rate HIl 0,06 Pmt 0 0 Pv -H9 Fy HI0 2 Type -11.90 Returns the number of periods for an iavestment based on periodic, constant payments and a constant interest rate Formula resals- 11,90 Help on the function OK Cancel

Answer 1

It will take 10.24 no. of periods, here years.

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