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Investment A: $800 compounded continuously at 3.5%

Investment B: $900 compounded quarterly at 3%
a. Which investment would be worth more after 20 years? (2 points)
b. How long will it take investment A to triple?
Round to the nearest tenth of a year. (2 points)

User Florie
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1 Answer

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a. To determine which investment would be worth more after 20 years, we can use the formula for continuous compounding and quarterly compounding respectively:

Investment A: A = Pe^(rt), where P = $800, r = 0.035, and t = 20
A = 800e^(0.035*20) = $1,641.95

Investment B: A = P(1 + r/n)^(nt), where P = $900, r = 0.03, n = 4 (since it's compounded quarterly), and t = 20
A = 900(1 + 0.03/4)^(4*20) = $1,617.45

Therefore, Investment A would be worth more after 20 years.

b. To find out how long it will take Investment A to triple, we can use the formula for continuous compounding:

A = Pe^(rt), where P = $800, A = 3P = $2,400, and r = 0.035
2.4 = 800e^(0.035t)
e^(0.035t) = 3
0.035t = ln(3)
t = ln(3)/0.035
t ≈ 19.9 years

Therefore, it will take Investment A approximately 19.9 years to triple. Rounded to the nearest tenth of a year, it will take 19.9 years.
User KARPOLAN
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