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Homework Help: Problem Solving Interest

  1. Jun 13, 2010 #1
    A fixed deposit investment attracts interest of 4.3% p.a. compounded annually. How long will $30 000 take to double in value?
     
  2. jcsd
  3. Jun 13, 2010 #2

    Mark44

    Staff: Mentor

    What have you tried? What are the relevant equations?
     
  4. Jun 13, 2010 #3
    This is all I know, I don't know what method should be used to find the answer?
     
  5. Jun 13, 2010 #4

    HallsofIvy

    User Avatar
    Science Advisor

    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 [itex]S(1+ r)^n[/itex]. Set that equal to 2S, cancel the "S"s and solve for n.
     
  6. Jun 16, 2010 #5
    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.
     
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