At what rate compounded continuously Will Money triple its amount in 5 years?
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In this section we cover compound interest and continuously compounded interest.
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Example: If a $500 certificate of deposit earns 4 1/4% compounded monthly then how much will be accumulated at the end of a 3 year period?
Example: A certain investment earns 8 3/4% compounded quarterly. If $10,000 is invested for 5 years, how much will be in the account at the end of that time period?
The basic idea is to first determine the given information then substitute the appropriate values into the formula and evaluate. To avoid round-off error, use the calculator and round-off only once as the last step.
One important application is to determine the doubling time. How long does it take for the principal in an account earning compound interest to double? Example: How long does it take to double $1000 at an annual interest rate of 6.35% compounded monthly?
The key step in this process is to apply the common logarithm to both sides so that we can apply the power rule and solve for time t. Use the calculator in the last step and round-off only once. Example: How long will it take $30,000 to accumulate to $110,000 in a trust that earns a 10% return compounded semiannually?
Example: How long will it take our money to triple in a bank account with an annual interest rate of 8.45% compounded annually?
Make a note that doubling or tripling time is independent of the principal. In the previous problem, notice that the principal was not given and that the variable P cancelled.
Example: If a $500 certificate of deposit earns 4 1/4% annual interest compounded continuously then how much will be accumulated at the end of a 3 year period?
Example: A certain investment earns 8 3/4% compounded continuously. If $10,000 dollars is invested, how much will be in the account after 5 years?
The previous two examples are the same examples that we started this chapter with. This allows us to compare the accumulated amounts to that of regular compound interest.
Given continuously compounding interest, we are often asked to find the doubling time. Instead of taking the common log of both sides it will be easier take the natural log of both sides, otherwise the steps are the same. Example: How long does it take to double $1000 at an annual interest rate of 6.35% compounded continuously?
The key step in this process is to apply the natural logarithm to both sides so that we can apply the power rule and solve for t. Use the calculator in the last step and round-off only once. Example: How long will it take $30,000 to accumulate to $110,000 in a trust that earns a 10% annual return compounded continuously?
Example: How long will it take our money to triple in a bank account with an annual interest rate of 8.45% compounded continuously?
YouTube Video:  --- What annual rate of interest compounded continuously is required to triple an investment in 5 years?Thus, the interest rate should be 24.57%.
In what time will a sum of money triple itself at the rate of 5 per annum?Given: The sum of money triples itself. ∴ The number of years by which a sum will triple itself at 5% p.a is 40 years.
What interest rate compounded continuously is earned by an investment that triples in 3 years?The interest rate needed to triple the investment is 3.329%.
What rate of interest compounded annually is required to double an investment in 5 years?Similarly, if you want to double your money in five years, your investments will need to grow at around 14.4% per year (72/5). If your goal is to double your invested sum in 10 years, you should invest in a manner to earn around 7% every year. Rule of 72 provides an approximate idea and assumes one time investment.
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