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    Miladys's Avatar
    Miladys Posts: 3, Reputation: 1
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    #1

    May 14, 2007, 11:05 AM
    Compound interest
    Can you please tell me how I can calculate manually.

    If 2000.00 is invested at 4% interest a year, compounded yearly.. How many years would it take to accumulate 100,000

    Please help
    Thanks
    Miladys
    ebaines's Avatar
    ebaines Posts: 12,131, Reputation: 1307
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    #2

    May 14, 2007, 02:34 PM
    You want your investment to grow by a factor of 50 (that is 100,000/2000), so what you need to figure out is how many times do you need to multiply 1.04 by itself to reach 50? Stated as a math formula, solve for N where 1.04^N >= 50. Use logarithms and you can solve for N pretty quickly. If you don't know how to use lagarithms, you can estimate the answer using the "rule of 72" - which says that an investment at a rate if return of x% will double in about 72/x years. So here you can see that the investment will approximately double in 72/4 = 18 years. You need the investment to grow by 50, so how many time does it need to double? Multiply that by 18 and you'll have an estimate of the correct answer.

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