Calculate Doubling Times for Different Investment Scenarios
What is the formula to calculate doubling time for a simple interest investment?
a) Using the formula Doubling Time = 70 / r, where r is the interest rate
How do you calculate doubling time for an investment compounded quarterly?
b) Using the formula Doubling Time = ln(2) / (n * ln(1 + r/n)), where n is the number of compounding periods per year
What is the formula for computing doubling time for an investment compounded continuously?
c) Using the formula Doubling Time = ln(2) / (r * ln(1 + r))
Answer:
For investment a) $55000 invested at 8% simple interest: 8.75 years (rounded to the nearest year).
For investment b) $5000 invested at 3% compounded quarterly: 23.45 quarters (rounded to the nearest quarter).
For investment c) $5000 invested at 8% compounded continuously: 8.66 years (rounded to the nearest year).
When calculating doubling time for different investment scenarios, there are specific formulas to consider based on the type of interest being used. For a simple interest investment, the formula is Doubling Time = 70 / r, where r represents the interest rate. This formula is used for investment a) $55000 at 8% simple interest.
On the other hand, when dealing with investments compounded quarterly, the formula changes to Doubling Time = ln(2) / (n * ln(1 + r/n)), where n stands for the number of compounding periods per year. This formula applies to investment b) $5000 at 3% compounded quarterly, resulting in a doubling time of 23.45 quarters rounded to the nearest quarter.
For investments compounded continuously like in scenario c) $5000 at 8% compounded continuously, the formula to determine the doubling time is Doubling Time = ln(2) / (r * ln(1 + r)). The calculated doubling time in this case is approximately 8.66 years rounded to the nearest year.