Problem

How long will it take for an investment to triple, if interest is compounded continuously at 6% ?

Answer

Expert–verified
Hide Steps
Answer

Final Answer: It will take approximately 18.31 years for an investment to triple if interest is compounded continuously at 6%.

Steps

Step 1 :We are given that the interest is compounded continuously at a rate of 6%. We want to find out how long it will take for an investment to triple.

Step 2 :We can use the formula for continuous compounding, which is A=Pert, where A is the final amount, P is the principal amount, r is the interest rate, and t is the time.

Step 3 :In this case, we want the final amount to be triple the principal amount, so we can set A=3P.

Step 4 :Let's set P=1, A=3, and r=0.06. We can then solve for t.

Step 5 :Solving the equation gives us t=18.310204811135165.

Step 6 :Rounding to two decimal places, we get t=18.31.

Step 7 :Final Answer: It will take approximately 18.31 years for an investment to triple if interest is compounded continuously at 6%.

link_gpt