a. How long will it take an investment to double in value if the interest rate is 3% compounded continuously? b. What is the equivalent annual interest rate?
a. How long will it take an investment to double in value if the interest rate is 3% compounded continuously? b. What is the equivalent annual interest rate?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
3.8-Number 22, please
Transcribed Image Text:21.
22.
a. If $4000 is invested at 1.75% interest, find the value of the investment at the end of 5 years if
the interest is compounded
i. annually,
ii. semiannually,
iii. monthly,
iv. weekly,
v. daily, and
vi. continuously.
Answer +
b. If A (t) is the amount of the investment at time t for the case of continuous compounding,
write a differential equation and an initial condition satisfied by A (t).
Answer
a. How long will it take an investment to double in value if the interest rate is 3% compounded
continuously?
b. What is the equivalent annual interest rate?
H
AA
Expert Solution
Step 1: Given Information:
Here,
Present value (PV) = 1
Future value (FV) = 2
Interest rate = 3%
No. of compounding periods = continuously
To Find:
Part A. No. of years =?
Part B. Equivalent annual interest rate =?
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