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Fundamentals of Financial Manageme...

14th Edition
Eugene F. Brigham + 1 other
ISBN: 9781285867977

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Chapter
Section
BuyFindarrow_forward

Fundamentals of Financial Manageme...

14th Edition
Eugene F. Brigham + 1 other
ISBN: 9781285867977
Textbook Problem

TIME FOR A LUMP SUM TO DOUBLE How long will it take $200 to double if it cams the following rates? Compounding occurs once a year.

  1. a. 7%
  2. b. 10%
  3. c. 18%
  4. d. 100%

(a)

Summary Introduction

To calculate: Time for a lump sum to double a) at 7%

Lump Sum: Lump sum is a large amount of money paid on a single occasion instead of paying small amount time to time. The amount has been paid for the value of an asset or for other purposes of retirement.

Explanation

Solution:

The formula to calculate time period is,

PV=FV(1+i)n (I)

Here,

  • PV is present value.
  • FV is future value.
  • i is interest rate.
  • n is number of years.

Substitute $1 for PV, $2 for FV and 7% for I in equation (I).

$1=$2(1+0.07)n(1+0

(b)

Summary Introduction

To calculate: Time for a lump sum to double at 10%

(c)

Summary Introduction

To calculate: Time for a lump sum to double at 18%

(d)

Summary Introduction

To calculate: Time for a lump sum to double at 100%.

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