Algebra and Trigonometry (6th Edition)
Algebra and Trigonometry (6th Edition)
6th Edition
ISBN: 9780134463216
Author: Robert F. Blitzer
Publisher: PEARSON
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**Financial Mathematics: Continuous Compounding**

**Problem Statement:**

Determine the time period required for an investment of $4825 to double, assuming a continuous compounding interest rate of 9%. Be sure to round your answer to two decimal places.

**Solution Format:**

- Type your answer in the provided text box.
- Enter the time period in years.
- Click "Submit Answer" once you have completed the calculation.

**Instructions:**

To solve this problem, use the formula for continuous compounding:

\[ A = Pe^{rt} \]

Where:
- \( A \) is the amount of money accumulated after time \( t \), including interest.
- \( P \) is the principal amount (initial investment).
- \( e \) is the base of the natural logarithm.
- \( r \) is the annual interest rate (in decimal form).
- \( t \) is the time in years.

Since the goal is to double the investment, set \( A = 2P \) and solve for \( t \):

\[ 2P = Pe^{0.09t} \]

Divide both sides by \( P \):

\[ 2 = e^{0.09t} \]

Take the natural logarithm of both sides:

\[ \ln(2) = 0.09t \]

Solve for \( t \):

\[ t = \frac{\ln(2)}{0.09} \]

Calculate the value of \( t \) and round it to two decimal places to find the time required for the investment to double.
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Transcribed Image Text:**Financial Mathematics: Continuous Compounding** **Problem Statement:** Determine the time period required for an investment of $4825 to double, assuming a continuous compounding interest rate of 9%. Be sure to round your answer to two decimal places. **Solution Format:** - Type your answer in the provided text box. - Enter the time period in years. - Click "Submit Answer" once you have completed the calculation. **Instructions:** To solve this problem, use the formula for continuous compounding: \[ A = Pe^{rt} \] Where: - \( A \) is the amount of money accumulated after time \( t \), including interest. - \( P \) is the principal amount (initial investment). - \( e \) is the base of the natural logarithm. - \( r \) is the annual interest rate (in decimal form). - \( t \) is the time in years. Since the goal is to double the investment, set \( A = 2P \) and solve for \( t \): \[ 2P = Pe^{0.09t} \] Divide both sides by \( P \): \[ 2 = e^{0.09t} \] Take the natural logarithm of both sides: \[ \ln(2) = 0.09t \] Solve for \( t \): \[ t = \frac{\ln(2)}{0.09} \] Calculate the value of \( t \) and round it to two decimal places to find the time required for the investment to double.
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