Math problem

Question

An investment offers 6% annual interest, compounded quarterly. How long will it take the investment to reach triple its initial value?

Answer 1

The basic formula here is

 

FV = PV (1+i/n)^nt

Where FV = future value

PV = present value

i = interest rate

t = time in years

n = frequency of compounding, i.e. quarterly compounding would be 4

 

For the situation here,

 

3PV = PV (1+.06/4)^4t

3 = 1.015^4t

ln3 = 4t ln(1.015)

Solving for t, we get 18.45 years