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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

 Feb 4, 2019
 #1
avatar+79 
+1

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?

 Feb 4, 2019
 #2
avatar+19811 
+1

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)

 Feb 4, 2019
edited by ElectricPavlov  Feb 4, 2019

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