At 6.10 percent interest, how long does it take to double your money? (Round your answer to 2 decimal places. (e.g., 32.16))

At 6.10 percent interest, how long does it take to double your money? (Round your answer to 2 decimal places. (e.g., 32.16))

 

Length of time

years

At 6.10 percent interest, how long does it take to quadruple it? (Round your answer to 2 decimal places. (e.g., 32.16))

Length of time

years

Explanation:

To find the length of time for money to double, triple, etc., the present value and future value are irrelevant as long as the future value is twice the present value for doubling, three times as large for tripling, etc. We can use either the FV or the PV formula. Both will give the same answer since they are the inverse of each other. We will use the FV formula, that is:

FV = PV(1 + r)t

Solving for t, we get:

t = ln(FV / PV) / ln(1 + r)

The length of time to double your money is:

FV = $2 = $1(1.061)t

t = ln(2) / ln(1.061) = 11.71 years

The length of time to quadruple your money is:

FV = $4 = $1(1.061)t

t = ln(4) / ln(1.061) = 23.41 years

  

Notice that the length of time to quadruple your money is twice as long as the time needed to double your money (the difference in these answers is due to rounding). This is an important concept of time value of money.

Calculator Solution:

Note: Intermediate answers are shown below as rounded, but the full answer was used to complete the calculation.

Enter

6.10%

$1

±$2

N

I/Y

PV

PMT

FV

Solve for

11.71

Enter

6.10%

$1

±$4

N

I/Y

PV

PMT

FV

Solve for

23.41