Chapter 2.3, Problem 43E

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7th Edition

Stefan Waner + 1 other

ISBN: 9781337274203

Textbook Problem

**Long-Term Investments** Exercises 41-48 are based on the following table, which lists interest rates on long-term investments (based on 10-year government bonds) in several countries in 2014.^{37} **[HINT:** See Example 2.**]**

Country |
U.S. | Japan | Germany | Australia | Brazil |

Yield |
2.5% | 0.5% | 1.0% | 3.5% | 4.2% |

If you invest $10,400 in Germany and the interest is compounded monthly, when, to the nearest month, will your investment be worth $20,000?

To determine

**To calculate:** The time a person must wait for his investment of

Explanation

**Given Information:**

The investment amount is

The interest is compounded monthly.

The interest rate table is,

Country | U.S. | Japan | Germany | Australia | Brazil |

Yield | 2.5% | 0.5% | 1.0% | 3.5% | 4.2% |

**Formula used:**

The formula for compound interest is,

Here,

The logarithmic relation of indexes is,

**Calculation:**

The rate of interest in Germany is 1.0%.

This can be expressed in decimal form as,

The interest is compounded annually therefore,

Substitute

Divide both side by

Sect-2.1 P-1ESect-2.1 P-2ESect-2.1 P-3ESect-2.1 P-4ESect-2.1 P-5ESect-2.1 P-6ESect-2.1 P-7ESect-2.1 P-8ESect-2.1 P-9ESect-2.1 P-10E

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