Republic Finance offers money at 093 per month compounded mo

Republic Finance offers money at 0.93% per month compounded monthly. Assume Republic Finance changes to continuous compounding but decides to keep the ANNUAL NOMINAL INTEREST rate the same as with the monthly compounding. How many years will it take for an investment to quadruple with this continuous compounding? (Your answer can be a decimal.)

Solution

Annual Nominal Rate =0.93%*12=11.16%

COntinuous Compounding Can be found using the formula (1+rt)^t which is equivalent to exp(rt)

4=exp(0.1116*t)

ln4=0.1116*t

t=ln4/0.1116

t = 12.42 years