How many years will it take money to triple at a 12% interest rate? A company is
ID: 1164051 • Letter: H
Question
How many years will it take money to triple at a 12% interest rate? A company is planning on purchasing a new machine in 2 years. The machine is expected to cost $250,000. The company earns 3% on their savings. How much should be deposited now? What is the value at Time-1 of this series of cash flows if i-12967 Time ? 0 Cash Flow-3000 1500 1500 What is the annual effective interest rate that corresponds with a nominal rate of 16% when interest s compounded monthly? Find the value of X to make the CFD balanced. The interest rate is 10%. 8,500Explanation / Answer
1.
Suppose $100 is deposited, we need to calculate the time it will take for the deposit to grow to $300.
FV = PV (1 + r)^n
Where,
Future value (FV) = $300
Present value (PV) = $100
Rate of interest (i) = 0.12
We need to find the value of (n)
Let's put all the values in the formula,
300 = 100 (1 + 0.12) ^n
300/ 100 = (1.12) ^n
3 = (1.12) ^n
To solve this equation we need to apply log on both sides, so the equation will be
log (3) = log (1.12) ^n
We know that log (m)^n = n* log (m)
log (3) = n log (1.12)
Values of log can be found in the log table, or we can use calculator, so let's put the values of logs
0.477121254719662 = n * 0.0492180226701817
n = 0.477121254719662/ 0.0492180226701817
n = 9.69404
So the value of n is 9.69 years
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Deposit amount = 250000/ (1 + 0.03) ^2
= 250000/ 1.0609
= 235648.9 or 235649
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