Question

Boretti has $400,000 in a stock fund. The fund pays a 10% return, compounded annually. If he does not make another deposit into the account, how long will it take for the account to increase to $2 million? (Do not round intermediate calculations. Round the final answer to two decimal places.)

Answer 1

Answer:

It will take 16.89 years  for the account to increase to $2 million

Explanation:

Present Value = $400,000

Nominal annual interest rate =  10%  compounded annually

Future Value = $2,000,000

Number of compounding periods = ?

Formula:

Future Value = Present Value * (1+Nominal annual interest rate)∧Number of compounding periods

$2,000,000 = $400,000 * (1+0,1)∧Time

We can then proceed to solve the equation:

16.89