   Chapter 5, Problem 13P Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
ISBN: 9781337395250

Solutions

Chapter
Section Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
ISBN: 9781337395250
Textbook Problem

TIME FOR A LUMP SUM TO DOUBLE How long will it take $300 to double if it earns the following rates? Compounding occurs once a year. a. 6% b. 13% c. 21% d. 100% (a) Summary Introduction To identify: Time for a lump sum to double at 6% 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 such as on a retirement. Explanation Given, The present value is$300.

The double amount would be $600. The interest rate is 6% or 0.06. The formula to calculate time period, PV=FV(1+i)n Where, • PV denotes present value. • FV denotes future value. • i denotes the interest rate. • n denotes the number of years. Substitute$300 for PV, $600(as it is double of investment) for FV and 0.06 for i.$300=$600(1+0.06)n(1+0.06)n=$600\$300(1+0

(b)

Summary Introduction

To identify: Time for a lump sum to double at 13%

(c)

Summary Introduction

To identify: Time for a lump sum to double at 21%

(d)

Summary Introduction

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

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