SOLUTION: I have a sum of 50,000 dollars I have 2 investment options:
A long term certificate of deposit that pays an annual rate of 4.25% compounded quarterly .
A mutual fund that over th
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Question 1031446: I have a sum of 50,000 dollars I have 2 investment options:
A long term certificate of deposit that pays an annual rate of 4.25% compounded quarterly .
A mutual fund that over the past several years averaged a return of 5% compounded annually.
For each investment option how long will it take for me to double my money?
Answer by Boreal(15235) (Show Source): You can put this solution on YOUR website!
P=Po{1+r/t)^nt
P/Po=2 when it doubles.
2=(1+0.0425/4)^4n
ln of both sides
ln2=4nln(1+(0.0425/4)); divide both sides by ln(1+(0.0425/4))
=65.58. Divide that (still not rounded) by 4 to get n in years.
16.4 years (now round).
Notice that the 50,000 doesn't even need to appear. Doubling the money is doubling the money.
Notice that the rule of 72 would say that doubling would take just under 18 years (for 4%) and 16.94 years for 4.25%. The answer makes sense.
===========================
2=(1.05)^n
ln2= n ln (1.05)
n=14.2 years.
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