Determine the time necessary for P dollars to double when it is invested at interest rate r compounded annually, montly, daily and continuously.
r=11%
a) annually
b) monthly
c) daily
d) continuously
a) 6.64188 years
b) 6.64188 months
c) 6.64188 days
d) you should be able to figure this out
see a trend yet?
a 2 = (1.11)^x
log2/log1.11 = x = 6.64 yrs
b 2 =( 1+.11/12)^12t
log2/log1.009166) = 12t t = 6.33 yrs
c 2= (1 +.11/365)^365t
t = 6.3022 yrs
d 2 = e^(.11)t t = 6.3013 yrs
As the compounding period becomes smaller the amount of time becomes shorter (i.e. the APY (annual Percentage Yield) becomes more)