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 9.155%.

Steps

Step 1 :The formula for continuous compounding is A=Pert, 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 9.155%.

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