Answered: If an investor intends to double…

If an investor intends to double $25,000 by investing in a bank that pays 7% interest per year, determine the time it would take to double the investment.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Question

6. If an investor intends to double $25,000 by investing in a bank that pays 7% interest per year, determine the time it would take to double the investment.

Expert Solution

Step 1

The time required to double the investment can be calculated by using the formula of future value .

$F u t u r e v a l u e = P r e s e n t v a l u e \times {(1 + r a t e)}^{t i m e}$

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Similar questions

PART C.) In planning for your retirement, you expect to save $5,000 in year 1, $6,000 in year 2, and amounts increasing by $1,000 each year through year 20. If your investments earn 7% interest per year, what is your retirement account worth at year 20?
A bank is offering a special deal. If you invest X now, the bank will give you 15,000 at time 7; 14,000 at time 8; 13,000 at time 9; and so on with the last payment being at time 14. Using an annual effective interest rate of 8%, determine X.
5. A lady will invest a Php 70,000,000 in a bank that offers a 4 percent annual compounded interest rate. How much will be the future value of the investment after 12 years?
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Double your money-Rule of 72. Approximately how long will it take to double your money if you get an annual return of 4.6%, 7.1%, or 10 4% on your investment? Approximately how long will it take to double your money if you get a 4.6% annual return on your investment? years (Round to two decimal places.)
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9 Suppose you invested $500 in a local credit union and: f(t) gives the future value of the investment in t years, if the APR is 2% and interest is compounded quarterly. • g(t) gives the future value of the investment in t years, if the APR is 2% and interest is compounded monthly. h(t) gives the future value of the investment in f years, if the APR is 2% and interest is compounded continuously. a. Write a function rule for f(t). For g(t). For h(t). Then describe how the rules are similar and how they are different. b. Based on your understanding of exponential growth, describe how the graphs of f(t), g(t), and h(t) are similar, and how they are different. c. On the same coordinate grid, use algebraic reasoning to sketch graphs of the three functions. .
Your friend told you about an NFT (Non-fungible Token) that they think will be worth $996 in 6 years. If your required return on investments of this risk is 16.5%, what is the most you should be willing to pay for it today? Round to 2 decimal places. Include a dollar sign ($) or percent (%) as appropriate.
How much would your investment be worth if you deposited $5,555.55 into a bank that paid simple interest of 4% for 10 years?
Assume that you own an annuity that will pay you $14,000 per year for 12 years, with the first payment being made today. You need money today to start a new business, and your uncle offers to give you $125,000 for the annuity. If you sell it, what rate of return would your uncle earn on his investment? a. 11.20% b. 4.46% c. 4.87% d. 20.01% e. 5.90%

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