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

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Multiple Choice

How many years will it take for $20 to grow to $100 if the simple interest rate is 4\% per year?

20 years

100 years

80 years

40 years

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Verified step by step guidance

Step 1: Understand the formula for simple interest, which is $ I = P \cdot r \cdot t $, where $ I $ is the interest earned, $ P $ is the principal amount, $ r $ is the annual interest rate, and $ t $ is the time in years.

Step 2: Calculate the total interest needed for the principal $ P = 20 $ to grow to $ 100 $. The total interest $ I $ is $ 100 - 20 = 80 $.

Step 3: Rearrange the simple interest formula to solve for $ t $: $ t = \frac{I}{P \cdot r} $. Substitute $ I = 80 $, $ P = 20 $, and $ r = 0.04 $ into the formula.

Step 4: Perform the division and multiplication operations to calculate $ t $. Specifically, divide $ I $ by $ P \cdot r $: $ t = \frac{80}{20 \cdot 0.04} $.

Step 5: Interpret the result for $ t $ to determine the number of years it will take for \$20 to grow to \$100 at a simple interest rate of 4\% per year.