27. How long will it take to double an investment at 4.9% compounded continuously? Round your answer to the nearest tenth of a year.

Answer :

Recall that to calculate the amount after t years that is compounded continously at a intereset rate r of an investment of a principal P is given by the formula

[tex]A=Pe^{rt}[/tex]

In this case, the initial amount is P. Since we want to calculate the value of t for which A is exactly 2*P we have the equation

[tex]2P=Pe^{rt}[/tex]

we know that r=0.049 and we want to solve this equation for t. WE start by dividing both sides by P. So we get

[tex]2=e^{0.049t}[/tex]

If we apply the natural logarithm on both sides, we get

[tex]0.049t=\ln (2)[/tex]

so if we divide both sides by 0.049, we get

[tex]t=\frac{\ln (2)}{0.049}=14.14145860[/tex]

which rounded to the nearest tenth of a year is 14.1 years