You plan to invest in bonds that pay 6.0%, compounded annually. if you invest $10,000 today, how many years will it take for your investment to grow to $25,000?

The answer is 16 years.

Explanation:

The formula for calculating the value of an investment that is compounded annually is given by:

Where:

is the number of years the investment is compounded,

is the annual interest rate,

is the principal investment.

We know the following:

And we want to clear the value n from the equation.

The problem can be resolved as follows.

First step: divide each member of the equation by :

Second step: apply logarithms to both members of the equation:

Third step: apply the logarithmic property in the second member of the equation:

Fourth step: divide both members of the equation by

We can round up the number and conclude that it will take 16 years for $10,000 invested today in bonds that pay 6% interest compounded annually, to grow to $25,000.

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