How long will it take a sum of money to double if interest is at 11% compounded semiannually?
Rate = 11% (semi-annual compounding),
Converting Rate into effective rate = r = (1+R/2)^2-1 = (1+11%/2)^2-1 = 11.3025%
Assuming invested amount = PV = $ 100
Expected amount is double of invested amount = FV = $ 200
Time = Tenor in years = t = ?
Formula of Present Value or PV:
PV = FV / (1+r)^t
100 = 200/(1+11.3025%)^t
100 = 200 / (1.113025)^t
(1.113025)^t = 200/100
(1.113025)^t = 2
Take natural log at both the sides;
t x ln(1.113025) = ln(2)
t x 0.107081534 = 0.693147181 [See note below]
t = 0.693147181 / 0.107081534
t = 6.473078556
t = ~ 6.47 years
Note: Value for ln(1.113025) = 0.107081534 and ln(2) = 0.693147181
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