Can you grow $3500 into $8,500 in 9 years if you invest at a 7% annual compound interest rate?

How to calculate the return on an investment with a annual compound interest rate.
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[@charlesmitchell5841]

The question doesn’t ask you how much time is needed to grow your principal to the desired amount, it asks you will it grow to the desired amount at that interest rate in 9 years. Learning how to use logs is important and great but it wasn’t necessary to answer this question. All I did was plug in the given information into the equation for compound interest and solved to see that the desired amount would not be reached. Reading a question correctly is just as important as understanding the math involved.

[@rodneyheintz44]

I agree with you Charles. Keep it simple.

[@aryusure1943]

@charles Indeed, it was easier to do it like that. That's what I did also and came up with a total of 6434,60$ which is not 8500$. So the answer was no.

[@RichaRat]

Since the problem was yes or no, I used the rule of 72. 72 divided by rate of return of 7 = 10.28 years. If it takes 10.25 years to grow 7000 from 3500, then you surely can't get 8500 in 9. 😁

[@adamglltt89]

Haha, Nice rule. Do you know why it works?

[@frederickdvorak6502]

Nice and clear demonstration of how to determine the number of years it would take to arrive at a set amount. But, if you need to answer rapudly the question, plugging 3500 * (1 + 0.07)^9 = 6434.61 < 8500 should suffice. On another note: there's a difference between "in" 9 years and "within" 9 years. It may be mathematical pedantry, but vocabulary does matter, even in finance.

[@Tkkj73]

No with a given interest rate. However If you can invest in an interest rate that pays a little bit over 10.36% yes you can

[@edmondscott7444]

If you were my teacher I would fall asleep in class. This could be explained in under 5 minutes using tables and calculator.

[@russelllomando8460]

got NO the hard way. I calc'ed 7% compounded 9 yrs = 6434.61. (of course 13 is correct - the long way) too much banking background to use logs. great test. thanks.

[@gabrit7836]

If this guy is able to stretch this video to 15 minutes, you can do whatever in life

[@Aereaux]

Since I am watching the video on my computer it was easier (for me) to set up a simple equation in Excel. 13 years gives you 8434.458 and 14 years gives you 9024.870

[@madinamuhudin5488]

Yes

[@israteeg752]

Actually, in real life if the interest in compounded annually , it would take 14 years to reach this goal , since the interest would be added to the principal only by the end of each year. In essence, we have a bar chart rather than a linear graph, so by the 13 year we would have not reached $8500 , yet by the last day of the 14 year the principal would surpass it once the sum of the 14 year's worth of interest is added to the principal .

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[@mylittlepitbull3143]

Without doing any math, I used logic to just guess no because the percentage would be in my favor as far as that guest went.

[@juliettehotel]

Don’t forget to factor in the inflation rate, which was 8% last year.

[@frederickdvorak6502]

No need. Interest rates include inflation expectations.

[@turkeytrac1]

How do you "log" without a calculator and one is a beginner?

[@CR3W1SH03S]

3500*1.07^9=6434.61, so no.

[@bobcornwell403]

Assuming the actual compounding happens just once a year, the answer is "no." But if the interest is compounded monthly, at a rate of 7/12% per month, the answer is clearly "yes", and the some.

[@richardl6751]

Compounded monthly would take 12.7 years, just a little shorter. Daily compounding makes it about 12.67 years.

[@bobcornwell403]

@richardl6751 Perhaps I calculated it wrong. I basically took the 7% and divided it by months, then added "1" to that. Next, I multiplied the years by 12 to get the number of times the interest would be compounded and used that as my exponent. Did I do something wrong?

[@adamglltt89]

Took 10 seconds to pop this in calculator. Would take me 5 minutes to explain it to my seven year old.

[@Ca_milo_G]

in bank? no way 1!!

[@kennethwright870]

$3500*1.07^9= $6434.61, so no

[@bandini22221]

Yeah I found that the simplest way to do it, too.

[@danieldennis9831]

No.

[@user-ri6rn7ti5h]

No what

[@safepethaven]

7% APY??? That is laughable; haven't seen those rates since the 1980s...

[@Jeanne90275]

My first mortgage was at 11%...with 20% down. A 6% mortgage was a pipedream.

[@safepethaven]

Those mortgages were at 16% in Dallas in the early 1980s; savings were 7% APY if you could put away 50k@@Jeanne90275

[@RickyLaFluer7]

did this really need to be 20 minutes? thats insane. skipping like usual

[@user-of7zj1bo3u]

Gee whiz doesn't this guy know about the rule of 72? Waste of time.

[@johnspencer9217]

no @ 7% x 9yr = 6434.60. to yield 8500@7% =13.11.yr I used pencils did not have calculator in my years (75) and if we did we would not have been aloud to use them. you are so good with your finger tips