Question

What is the exact time t, in years, needed for the balance of an account that earns 5% annual 8. Interest compounded continuously to triple?

Answer 1

Answer:

It takes 22.52 years for the balance to triple in value.

Step-by-step explanation:

Continuous compounding:

The amount of money earned using continuous compounding is given by the following equation:

$A(t) = A(0)(1+r)^t$

In which A(0) is the initial amount of money and r is the interest rate, as a decimal.

Interest rate of 5%.

This means that $r = 0.05$, and thus:

$A(t) = A(0)(1+r)^t$

$A(t) = A(0)(1+0.05)^t$

$A(t) = A(0)(1.05)^t$

Time for the balance to triple?

This is t for which $A(t) = 3A(0)$. So

$A(t) = A(0)(1.05)^t$

$3A(0) = A(0)(1.05)^t$

$(1.05)^t = 3$

$\log{(1.05)^t} = \log{3}$

$t\log{1.05} = \log{3}$

$t = \frac{\log{3}}{\log{1.05}}$

$t = 22.52$

It takes 22.52 years for the balance to triple in value.