If money is invested at r percent interest, compounded annually, the amount of the investment will double in approximately ${"mathml":"<math class="image_resized" style="width:24px;height:32px"><span style="font-family:$ years. If Pat's parents invested $5000 in a long term bond that pays 8 percent interest, compounded annually, what will be the approximate total amount of the investment 18 years later, when Pat is ready for college?

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${"mathml":"<math class="image_resized" style="width:52px;height:12px"><span style="font-family:$

answer is A.

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Detailed Solution

Concept- As it is a problem based question so first we need to read thoroughly and understand the question. Here it is asking about the total investment 18 years later by calculating the principal amount , interest and time.
Here r means rate of interest
Ws also know that the investment will approximately double in ${"mathml":"<math class="image_resized" style="width:60px;height:32px"><span style="font-family:$ Here they are investing $5000 at 8% for 18 years
Put r = 8
So ${"mathml":"<math class="image_resized" style="width:24px;height:36px"><span style="font-family:$ is about 9 years, meaning investment will get double in 9 years
In first 9 years $5000 doubles to $10,000
In next 9 years $10,000 doubles to $20,000
Therefore, the approximate total amount of investment in 18 years will be $20,000 .
Hence, the correct answer in option 1.

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