Understanding Compound Interest and Sole Proprietorship
How long does it take for $14050 to grow to $26500, if interest rates are set at 15%?
A. 4.54 years
B. 423.33 years
C. 0.59 years
D. 12.23 years
Which of the following statements is correct?
1. Compared to corporations, it is easier to make decision in sole proprietorship.
2. It is difficult to transfer ownership in sole proprietorship.
A. Only 1
B. Only 2
C. Both 1 and 2
D. Neither 1 nor 2
Answers:
For the first question, the correct answer is A. 4.54 years.
For the second question, the correct answer is B. Only 2.
It will take approximately 4.54 years for $14,050 to grow to $26,500 with an interest rate of 15%. To calculate the time it takes for an amount to grow with a given interest rate, we can use the formula for compound interest:
Future Value = Present Value * (1 + Interest Rate)^Time
In this case, the present value is $14,050 and the future value is $26,500. The interest rate is 15%. We need to solve for the time.
$26,500 = $14,050 * (1 + 0.15)^Time
Dividing both sides by $14,050:
(1 + 0.15)^Time = $26,500 / $14,050
Taking the natural logarithm of both sides:
Time * ln(1 + 0.15) = ln($26,500 / $14,050)
Time = ln($26,500 / $14,050) / ln(1 + 0.15)
Time ≈ 4.54 years
Therefore, it will take approximately 4.54 years for $14,050 to grow to $26,500 with an interest rate of 15%.