The value of the investment is expected to grow by 3% per year. How long will it take to double? A. About 4 years B. About 6 years C. About 12 years D. About 24 years

Given the statement:

The value of the investment is expected to grow by 3% per year.

Determine how long will it take for the investment to double.

Explanation:

Since it is not stated if either the investment is a compounded investment or it follows the simple interest rate, hence we will assume that it is in a simple interest rate. SImple interest rate usually takes a long period of time in order for the principal amount to double, and we can prove this by setting a specific principal amount, let say 1000, with the interest rate of 3% or 0.03 and we will use the longest possible year which is 24.

Formula for Simple Interest

I = Prt

I = interest

P = principal amount

r = rate

t = term

Solution:

I = 1000 (0.03)(24)

I = 720

After 24 years the investment barely becomes double, hence it might take a few more years for it to actually double, but we can assume that the answer is correct since it is the highest possible value that we can get.

Final answer:

D. About 24 years