Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

10. Time Value of Money

Time Value of Money Equations

Financial Accounting

10. Time Value of Money

Time Value of Money Equations

Previous problemNext problem

Struggling with Financial Accounting?

Join thousands of students who trust us to help them ace their exams!Watch the first video

Multiple Choice

To the nearest year, it will take about how many years to double the original investment at an annual interest rate of 8\% compounded annually?

16 years

12 years

9 years

6 years

Previous problemNext problem

Verified step by step guidance

Step 1: Understand the formula for compound interest and doubling time. The formula for compound interest is \( A = P(1 + r)^t \), where \( A \) is the future value, \( P \) is the principal amount, \( r \) is the annual interest rate, and \( t \) is the time in years. To find the doubling time, we set \( A = 2P \).

Step 2: Substitute the values into the formula. Since the annual interest rate is 8\%, \( r = 0.08 \). The equation becomes \( 2P = P(1 + 0.08)^t \).

Step 3: Simplify the equation by dividing both sides by \( P \). This gives \( 2 = (1 + 0.08)^t \), which simplifies further to \( 2 = 1.08^t \).

Step 4: Solve for \( t \) using logarithms. Take the natural logarithm (ln) of both sides: \( \ln(2) = \ln(1.08^t) \). Using the logarithmic property \( \ln(a^b) = b \cdot \ln(a) \), the equation becomes \( \ln(2) = t \cdot \ln(1.08) \).

Step 5: Rearrange the equation to isolate \( t \): \( t = \frac{\ln(2)}{\ln(1.08)} \). Calculate \( \ln(2) \) and \( \ln(1.08) \) to find the approximate value of \( t \), which represents the number of years it will take to double the investment.