Question

Cujo invested $2,500 in an account earning 3.4% annual interest that is compounded semi-annually. How long will it take the investment to triple?

Answer 1

Answer:

10 years and 10 months.

Explanation:

Provided information we have,

Amount invested = $2,500

Earning interest rate = 3.4% annually

Compounded semiannually

Thus, period to be considered = 2 in a year

Interest rate = $3.4 \times \frac{6}{12} = 1.7$

Thus, effective interest rate = 1.7%

Now, according to future value of compounded rate @ 1.7% at a period 65 factor = 2.9913

Thus value will be $2,500 $\times$ 2.9913 = 7,478.25

That is approximate triple in value.

Thus, total period in number of years = 65/6 months = 10.833 years.

0.833 $\times$ 12 months = 10 months

That exactly means 10 years and 10 months.

Answer 2

Answer:32.59years to triple at 3.4%

Explanation:

A(t)=2,500(1+0.034/2)^2t

=2,500(1.017)^2t