You deposit $20,000 in an account that doubles in 7 years. How many years will it take the account to be reduced to its original value if it loses 12% per year?
A) 4.92 years
B) 5.42 years
C) 6.62 years
D) 8.22 years

Question

Quizplus · Accepted Answer

After 7 years, the account will double to $40,000. 
To find out how many years it takes for the account to be reduced to its original value: 
0.88^n * $40,000 = $20,000 
where n is the number of years. 
Solving for n: 
0.88^n = 0.5 
n log(0.88) = log(0.5) 
n = log(0.5) / log(0.88) 
n ≈ 5.42 years 
Therefore, the answer is B.

You Deposit $20,000 in an Account That Doubles in 7