Compound Interest

Question

How much time does it take an investment of $1000 to grow to $8000 at a rate of 9.5%, compounded annually?

Answer 1

Formula for calculating compound interest annually is given as below:

A = P(1 + R/100)^t

where, A = Final amount = 8000

P = Principal amount = 1000

R = Rate of interest = 9.5%

t = time period in years

substituting the values in the above formula,

8000 = 1000 (1 + 9.5/100)^t

8000/1000 = (1 + .095)^t

8 = 1.095^t

taking ln on both sides,

ln(8) = t ln(1.095)

t = ln(8)/ln(1.095)

t = 22.91

Therefore, it will take 22.91 years for 1000$ to grow to 8000$.