Answer to Question 3:

Your grandfather dies and leaves you $1000. If you could invest it at 10 percent interest, how long would it take for the amount to double?

1. a bit more than 7 years.

2. 10 years.

3. a bit less than 7 years.

Choose the correct option.

The correct answer is 1.

Using the formula

A1 = A0 (1 + r)n

and substituting $2000 for A1 and $1000 for A0 and 0.10 for r, and then dividing both sides by $1000, we obtain

2 = (1.1)n.


Substitution of n = 7 yields 1.9487 for the expression on the right side of the equality. The number of years will therefore have to be bit more than 7 to satisfy the equation.

If you picked option 2 you need to go back to the beginning of this topic and start over.

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