E492 Summer 2018 How many years will be required for a given

E492 Summer 2018 How many years will be required for a given sum of money to triple, if it is bank account that pays 6% per year, compounded annually 3. a. 40 years b. 29 years c. 30 years d Wite your answer if it\'s different from the above

Solution

Question 3

Let principal be P

The given sum of money becomes triple.

So,

Amount = 3P

Interest rate = 6% or 0.06

Calculate the time period -

A = P(1+r)ⁿ

3P = P(1+0.06)ⁿ

3P/P = (1.06)ⁿ

3 = (1.06)ⁿ

Taking log both sides,

log3 = n log1.06

n = log3/log1.06

n = 0.4771/0.0253 = 18.69 or 19 years

It will take 19 years to triple the given sum of money.

Hence, the correct answer is the option (d).