Suppose you make an investment of $2000 that you are not allowed to cash in for five years. Unfortunately, the value of the investment decreases by 15% per year. How long will it be before your investment decreases to half its original value?
A)2.5 years
B)3.6 years
C)4.1 years
D)4.3 years

Question

Quizplus · Accepted Answer

After the first year, the investment will be worth $1700. After the second year, it will be worth $1445. After the third year, it will be worth $1228. After the fourth year, it will be worth $1044.2. After the fifth year, it will be worth $887.57. Half of the original value of $2000 is $1000. Solving for x in the equation $2000(0.85)^x = $1000 gives x approximately equal to 4.3 years. Therefore, it will take about 4.3 years for the investment to decrease to half its original value.

Suppose You Make an Investment of $2000 That You Are