The formula can be used to find the number of years t required to multiply an investment

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The formula

In m n In 1 + п) n


can be used to find the number of years t required to multiply an investment m times when r is the per annum interest rate compounded n times a year.

(a) How many years will it take to double the value of an IRA that compounds annually at the rate of 12%?

(b) How many years will it take to triple the value of a savings account that compounds quarterly at an annual rate of 6%?

(c) Give a derivation of this formula.


Problem involves zero-coupon bonds. A zero-coupon bond is a bond that is sold now at a discount and will pay its face value at the time when it matures; no interest payments are made.

Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the...
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Precalculus

ISBN: 978-0321716835

9th edition

Authors: Michael Sullivan

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