Doubling Your Money

Problem

You want to figure out how long it will be before an initial investment will double, given an annually compounded interest rate.

Solution

Use the NPER function.

Discussion

Let's say you invest $5,000 now at an annual interest rate of 8% and want to know how many years it will be until the investment doubles, assuming interest is compounded annually. You can use NPER to figure this out.

The syntax for NPER is =NPER(rate, pmt, pv, fv, type), where rate is the interest rate per period, nper is the number of payment periods, pmt is the payment per period, pv is the present value, fv is the future value, and type is an indicator of the payment type (0 for payments at the end of each pay period or 1 for payments at the beginning of each pay period).

The formula for our example is =NPER(0.08, 0, -5000, 10000, 0), which returns a value of 9.01 years.

You can, of course, compute how long before your investment triples, quadruples, and so on, by entering the appropriate future value. In this example, I entered twice the present value. Notice that I change signs between present and future values as well.