SOLUTION: What interest rate is needed for an investment to triple in four years if it is compounded semiannually?
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Question 737848: What interest rate is needed for an investment to triple in four years if it is compounded semiannually?
Answer by josgarithmetic(39617) (Show Source): You can put this solution on YOUR website!
Translate this into an equation. Assign variables as understood or known or unknown before translating the description and question into the equation.
A=amount after some time
P=initial investment
r=the interest rate in decimal form
Semi-annual means twice per year. To be simpler, each half a year is the time period, so let's use t=halfyear time period, and you want t to be 8. Four years will have eight semiannual periods.
Your expected A will be 3*P, because you want the investment to be tripled after the 8 compounding semiannual periods.
Simplify a little
Take logarithms of each side, for convenience I'm choosing natural logs,
Put that into exponential form
Combining steps,
That is the answer in symbolic form, which you can now use to plug in your given values and find r in your example question. You would use either an electronic calculator or maybe a simple computer program (or fancier software program if you have something of such.)
(The rendering is cutting off the top of some of the exponent symbols so I hope you can follow the steps in the process).
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