Question

Does doubling the compound frequency (for example, from twice per year to four times per year) mean that it will only take half as long to reach the same amount?

(A) Yes
(B) No
(C) It depends on the interest rate
(D) It depends on the initial investment amount

Answer 1

No, doubling the compound frequency does not mean that it will only take half as long to reach the same amount.

Step-by-step explanation:

No, doubling the compound frequency does not mean that it will only take half as long to reach the same amount.

When the compound frequency doubles, the time it takes to reach a certain amount decreases, but it does not decrease by half. The increase in frequency only affects the growth in the number of compounding periods, not the overall time it takes to reach a certain amount.

For example, if you double the compound frequency from twice per year to four times per year, the amount will increase by a factor of four, not just two.