172k views
1 vote
How long does it take for an investment to double in value if it is invested at 13% compounded quarterly? Compounded continuously?

1 Answer

3 votes

For interest Compounded​ continuously

The formula for calculating continuously compounded interest is expressed as

A = Pe^rt

where

A is the final amount after t years

P is the principal or initial amount

r is the interest rate

t is the number of years

From the information given,

final amount = 2 x initial amount

Thus,

A = 2P

r = 13/100 = 0.13

By substituting these values into the formula, we have

2P = Pe^0.13t

Dividing both sides by P, we have

2P/P = P/Pe^0.13t

2 = e^0.13t

Taking the natural log of both sides, we have

ln 2 = ln e^0.13t

Recall the following rules of logarithm

lna^b = blna

lne = 1

Thus, we have

ln 2 = 0.13tln e

ln 2 = 0.13t

0.13t = ln 2

Dividing both sides by 0.13, we have

0.13t/0.13 = ln 2/0.13

t = 5.33

It will take 5.33 years for the investment to double in value.

User Daviid
by
5.1k points
Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.