Question

You have $2500 to invest at 6% interest compounded quarterly. for how many years will the money need to be invested for that amount to triple? a=p[1+(r/n)]n/y

Answer 1

To determine the number of years needed, we use theories and formula from economics. The future amount should be triple the original amount and this would be 2500(3) = 7500 dollars. The interest rate is compounding so we use formula for compounding interest rate. We do as follows:

F = P ( 1 + i)^n

where F is the future amount, P is present value, i is the effective interest rate, n is the number of compounding periods

We need to convert the interest to per year.

i = (1 + r/m)^m - 1 = 0.061208 = 6.12% per year


F = P ( 1 + i)^n

7500 = 2500 ( 1 + .0612)^n
n = 18.50 or 19 years