# Problem Solving Interest

1. Jun 13, 2010

A fixed deposit investment attracts interest of 4.3% p.a. compounded annually. How long will $30 000 take to double in value? 2. Jun 13, 2010 ### Mark44 ### Staff: Mentor What have you tried? What are the relevant equations? 3. Jun 13, 2010 ### jahaddow This is all I know, I don't know what method should be used to find the answer? 4. Jun 13, 2010 ### HallsofIvy That's very peculiar! If you aren't taking a course that has discussed "compound interest", why have you been assigned a problem like this? If you are then surely there are formulas for compound interest in your textbook aren't there? If I remember correctly, after n years, an amount S at r rate of interest (so that 100r% is the annual percentage rate) compounded annually is given by $S(1+ r)^n$. Set that equal to 2S, cancel the "S"s and solve for n. 5. Jun 16, 2010 ### quantum13 A powerful strategy is to think about the specific case and try to obtain a general equation. The first year, you have$30 000

The second year it is compounded by \$30 000 x .043 so you have 30 000 + 30 000 x .043
= 30 000 (1.043)

The next year your money increases again by 30 000 (1.043) (.043) for a total of 30 000 (1.043) + 30 000 (1.043) (.043) = 30 000 (1.043) (1.043) = 30 000 (1.043)^2

By now you should have noticed a pattern.