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1 November, 12:12

Assume your granny put $45,000 into a trust fund for you earning 5%. You cannot withdraw the money until it has doubled. How many years must you leave the money in the trust fund (before the original $45,000 has doubled) ?

a. 10.24

b. 11.35

c. 12.23

d. 13.12

e. 14.21

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  1. 1 November, 12:16
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    E) $14.21 years

    Explanation:

    We need to find the number of years it will take your trust fund to reach $90,000.

    To find out, we use this equation:

    PV = FV (1 + i) ^X

    Where:

    PV = Present value of money (in this case $45,000)

    FV = Future value of money (in this case $90,000)

    i = Interest rate

    X = number of compounding periods (in this case, number of years)

    Now, we plug the amounts into the equation and solve:

    $45,000 = $90,000 (1 + 0.05) ^X

    $45,000/$90,000 = 1.05^X

    0.5 = 1.05^X

    Log0.5 = Log1.05X

    X = Log0.5 / Log 1.05

    X = 14.21
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