Question

At a growth (interest) rate of 10 percent annually, how long will it take for a sum to double? To triple? Select the year that is closest to the correct answer

Short answer

It will take 7 years and 12 years approximately to make a sum double and triple, respectively.

Step-by-step solution

Identification of the required information

Present value (PV) = $1

Future value (FV) = 2

Interest Rate (i) = 10%

 Number of periods (n) to double a sum

$\begin{array}{rcl}FV& =& PV\times {\left(1+i\right)}^n\\ \$2& =& \$1\times {\left(1+10\%\right)}^n\\ n& =& 7\end{array}$

Number of periods (n) to triple a sum by taking FV at $3

$\begin{array}{rcl}FV& =& PV\times {\left(1+i\right)}^n\\ \$3& =& \$1\times {\left(1+10\%\right)}^n\\ n& =& 12\end{array}$