Question

- Find monthly compounded interest rate if holding period return (HPR) over one year and a half is 17%
- A sum of $5000 is invested at an interest rate of 9% per year. Find the time required for the money to double if the interest is compounded continuously

Answer #1

**(a)** Holding Period Return = 17 % and Holding
Period = 1,5 years or 18 months

Therefore, Monthly Compounded Interest Rate = [(1.17)^(1/18) - 1] x 100 = 0.8761 %

**(b)** Initial Investment = $ 5000, Annual
Interest Rate = 9 % and Target Future Value = 2 x 5000 = $
10000

Let the required time period be T years

Therefore, 10000 = 5000 x e^(0.09 x T)

= (0.09 x T)

T = / 0.09 = 7.701635 years ~ 8 years

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