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A capital investment firm placed $1.5 million 2 years ago to acquire part-ownership in an innovative chip making company. How long will it take from the date of their initial investment for their share of the chip company to be worth $3 million, if the company is realizing a 20% per year return?A capital investment firm placed $1.5 million 2 years ago to acquire part-ownership in an innovative chip making company. How long will it take from the date of their initial investment for their share of the chip company to be worth $3 million, if the company is realizing a 20% per year return?

Answer :

Shahzaibfaraz

Answer:

t = 3.801784017 years rounded off to 3.80 years

Explanation:

We need to calculate the time it takes for the initial investment of $1.5 million to grow and have a future value of $3 million. The formula to calculate the future value of a sum of money is,

FV = I * (1+r)^t

Where,

  • FV is the future value
  • I is the initial investment amount
  • r is the rate of return
  • t is the time in years

3 = 1.5 * (1+0.2)^t

3 / 1.5 = 1.2^t

2 = 1.2^t

log (2) / log (1.2) = t

t = 3.801784017 years rounded off to 3.80 years

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