Question

(AKS 16/17): You have earned $200 doing chores around the house. How long will it

take to triple your money if you keep it in an account earning 4.25% compounded
continuously? Use the formula:

Answer 1

It will take 26 years

Explanation:

In this question, we are tasked with calculating the time it will take for an amount of money earned to be tripled if compounded continuously.

To calculate this amount of time, we are going to use the formula for compound interest. Mathematically, for an interest compounded, the amount is as follows;

`A = P(1 + r/n)^(nt)`

Where;

A is the amount at the end of compounding; which is 3 times the original amount = 3 × $200 = $600

P is the initial amount = $200

r is the rate of compounding = 4.25% = 4.25/100 = 0.0425

n is the number of times in which the amount is compounded annually, we take this as 1

t is the time taken to reach the amount

We substitute these values in the equation;

600 = 200(1 + 0.0425/1)^t

Divide through by 200

3 = (1.0425)^t

Take the logarithm of both sides

log 3 = log(1.0425)^t

log 3 = tlog 1.0425

t = log 3/log1.0425

t = 26.4 which is approximately 26 years