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# Compound Interest!!

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Senior Manager
Joined: 15 Feb 2011
Posts: 263
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Compound Interest!! [#permalink]  26 Aug 2011, 22:49
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Well it's a very easy question which I seem to be getting wrong...for most of you this might be like a cherry on the cake hence, would REALLY appreciate if someone can help me with the workings.

A total of 1000$was invested at compounded annual interest rate. At the end of 12 years, the total value will be 4000$. How many years are needed to reach a total of 8000\$.
Director
Joined: 01 Feb 2011
Posts: 763
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Re: Compound Interest!! [#permalink]  27 Aug 2011, 19:14
1
KUDOS
Compound Interest A = P(1+r/n)^(nt)

Here n = 1 as its calculated annually.

t = 12

4000 = 1000(1+r)^12

4 = (1+r)^12

=> 4^(1/12) = 1+r equation 1

8000 = 1000(1+r)^n

8 = (1+r)^n

=> 8 = (4^(1/12))^n => 2^3 = 4^(n/12)
=> 2^3 = 2^(n/6)

> 3 = n/6 => n = 18 years
Current Student
Joined: 17 May 2009
Posts: 32
Location: United States
GMAT 1: 770 Q51 V44
GPA: 3.62
WE: Corporate Finance (Manufacturing)
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Kudos [?]: 62 [1] , given: 0

Re: Compound Interest!! [#permalink]  28 Aug 2011, 15:24
1
KUDOS
1000*r^12 = 4000
r^12 = 4
(r^6)^2 = 2^2
r^6 = 2

It takes 6 years for the investment to double.

2 * 2 * 2 = r^6 * r^6 * r^6
8 = r^18

It takes 18 years for the investment to double three times.
Senior Manager
Joined: 15 Feb 2011
Posts: 263
Followers: 4

Kudos [?]: 41 [0], given: 9

Re: Compound Interest!! [#permalink]  28 Aug 2011, 20:45
Thanks Spidy & Bodleyev..

+1 to both for helping..
Intern
Joined: 27 Aug 2011
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Re: Compound Interest!! [#permalink]  29 Aug 2011, 02:34
bodleyev nice way of approcahing the solution .. it definitely saves some time.
Re: Compound Interest!!   [#permalink] 29 Aug 2011, 02:34
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# Compound Interest!!

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