Problem

What annual rate of interest compounded continuously is required to triple an investment in 12 years? Round your answer to three decimals.
A. $9.155 \%$
B. $4.794 \%$
C. $5.946 \%$
D. $9.587 \%$

Answer

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Answer

Final Answer: The annual rate of interest compounded continuously required to triple an investment in 12 years is \(\boxed{9.155\%}\).

Steps

Step 1 :The formula for continuous compounding is \(A = Pe^{rt}\), where \(A\) is the final amount, \(P\) is the principal amount, \(r\) is the annual interest rate, and \(t\) is the time in years.

Step 2 :In this case, we know that \(A/P = 3\) and \(t = 12\) years. We need to solve for \(r\).

Step 3 :We can rearrange the formula to get \(r = \ln(A/P) / t\).

Step 4 :Then we can substitute the known values into the formula and calculate \(r\).

Step 5 :Finally, we need to convert \(r\) from a decimal to a percentage and round to three decimal places.

Step 6 :Final Answer: The annual rate of interest compounded continuously required to triple an investment in 12 years is \(\boxed{9.155\%}\).

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