Question

Approximately how many years are needed to double a $500 investment when interest rates are 13.50 percent per year? (Round your answer to 2 decimal places)

Answer 1

Use the Amount formula for compound interest situations:

A = P(1 + r)^t.  We know everything but t.  Find t (# of years)

Double $500 is $1000.   $1000=$500(1.1350)^t, or 2 = 2.135^t

Solve for t.   To do this, take the log of both sides:

log 2 = t(log 1.135), or t = (log 2) / (log 1.135)  =  5.5 years, approx.