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Term 3 · Week 1 · Compound Interest

Challenge problem · non-routine

Challenge Non-routine

Money is invested at 7% compounded annually. After how many whole years will the investment first be at least double its original value?

Show step-by-step solution

Answer: 11 years

  1. We need 1.07n≥21.07^n \ge 2.
  2. 1.0710≈1.967<21.07^{10} \approx 1.967 < 2 and 1.0711≈2.105≥21.07^{11} \approx 2.105 \ge 2.
  3. So it takes 11 whole years. (Using logarithms, n=log⁡2/log⁡1.07≈10.24n = \log 2 / \log 1.07 \approx 10.24, rounded up.)

Common errors to watch for

  • Using the simple-interest estimate 100÷7≈14100 \div 7 \approx 14 years.

Budget of Work competencies

  • gm11.t3.w1.c1
    Solve problems involving compound interest, including maturity value, future value, nominal rates, and number of terms.

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