Question

How long will it take for money to tripe at a rate of 4.5% compounded quarterly?

How long will it take for money to tripe at a rate of 4.5% compounded quarterly?

Homework Answers

Answer #1

Here we will use the following formula:

FV = PV * (1 + r%)n

where, FV = Future value, PV = Present value, r = rate of interest = 4.5% compounded quarterly, so quarterly rate = 4.5% / 4 = 1.125% , n= time period = n

Suppose Present value (PV) is $100 and Future valyue (FV) is 3 * $100 = $300, then,

putting theses values in the above equation, we get,

$300 = $100 * (1 + 1.125%)n

$300 / $100 = (1 + 0.01125)n

3 = (1.01125)n

(3)n = 1.01125

(1.01125)98.5 = (1.01125)n

n = 98.5

So, it will take 98.5 quarters or 98.5 / 4 = 24.62 years, for the money to triple.

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