SOLUTION: Hi, i,m confused with this problem i'm not sure whats the difference b/t compounded continously and compounded annually. this is the problem Dtermine the time necessary for $7096.

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Question 140035: Hi, i,m confused with this problem i'm not sure whats the difference b/t compounded continously and compounded annually. this is the problem
Dtermine the time necessary for $7096.1 to double if invested at interest rate 13.2032% a) compounded annually b) compounded monthly c)compounded daily d) compounded continously
Answer by stanbon(75887) (Show Source):
You can put this solution on YOUR website!
Dtermine the time necessary for $7096.1 to double if invested at interest rate 13.2032% a) compounded annually b) compounded monthly c)compounded daily d) compounded continously
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Periodic compounding:
A(t) = P(1+ (r/n))^(nt)
a) annually (n=1)
2*7096 = 7096(1 + (0.132032/1))^(1*t)
2 = (1.132032)^t
t*ln(1.132032) = ln2
t = 5.589... years
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Monthly compounding:
n=12 in the same formula
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Daily compounding
n=365 in the same formula
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Continuous compounding:
A(t) = Pe^(rt)
2*7096 = 7096 e^(0.132032t)
2 = e^(0.132032t)
0.132032t = ln2
t = 5.2498 years
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Cheers,
Stan H.