7. All of the following problems involve interest that is being compounded continuously. (a) Compute the interest rate needed to double an investment every seven years. (b) With a 10% interest, how long will it take to triple an initial investment. (c) Irvin forgot what is the interest rate at his bank. All he knows is that after five years, his initial investment doubled. When will it triple? (Hint: There are two unknowns; one is the interest rate. Whenever there are two unknowns, two equations are needed. So, use the information about money at different times in an appropriate manner.)

7. All of the following problems involve interest that is being compounded continuously. (a) Compute the interest rate needed to double an investment every seven years. (b) With a 10% interest, how long will it take to triple an initial investment. (c) Irvin forgot what is the interest rate at his bank. All he knows is that after five years, his initial investment doubled. When will it triple? (Hint: There are two unknowns; one is the interest rate. Whenever there are two unknowns, two equations are needed. So, use the information about money at different times in an appropriate manner.)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

7. All of the following problems involve interest that is being compounded
continuously.
(a) Compute the interest rate needed to double an investment every seven years.
(b) With a 10% interest, how long will it take to triple an initial investment.
(c) Irvin forgot what is the interest rate at his bank. All he knows is that
after five years, his initial investment doubled. When will it triple? (Hint:
There are two unknowns; one is the interest rate. Whenever there are two
unknowns, two equations are needed. So, use the information about money
at different times in an appropriate manner.)
(d) A person has money withdrawn from his savings account to be placed in
his checking account at a continuous fixed basis at a rate of $1,000 a year.
This person started with $20,000 placed in the savings account that has a
5% interest. How much will be in the savings account in one year? (Hint: A
different expression for the growth of money needs to be derived. So, start
with AM and, instead of the Equation 2.8 expression, determine what AM
equals in this setting. Then, solve the equation.)

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