What is the interest rate necessary for an investment to quadruple after 7 year of continuous compound interest?
Since this question involve continuous compound interest, we will use the associated formula.
We are given that the invest quadruples in 7 years. This tells me that when t=7 that A will be 4 times P. I can write that in symbols A=4P.
Substitute these values into the continuous compound formula and solve for the interest rate.
|Substitute the values of t and A into the formula|
|Solve for r by dividing both sides by P and simplifying|
|Solve for r by taking the log of both sides.|
|Solve for r by dividing both sides by 7 and simplifying|
|Find the value in the calculator|
|Write the answer as a percentage rounded to two decimal places|