Answer:
It will take approximately 8.31 years or 8 years and 4 months to earn $75,000 by investing $50,000 at 5% compounded continuously.
Explanation:
Compound of interest is the addition of interest value in principal amount to calculate further interest on the interest and principal amount as well. It other words it is Interest on Interest situation. Reinvesting of interest value is the concept behind this.
We use following formula to calculate the period required to earn compounded value.
Future Value = Present value ( 1 + rate of Interest )^number of period
$75,000 = $50,000 x ( 1 + 0.05 )^n
$75,000 / $50,000 = ( 1.05 )^n
1.50 = 1.05^n
log 1.50 = n log 1.05
n = log 1.5 / log 1.05
n = 8.31
