An investment compounds annually at an interest rate of 34.1% What is the smallest investment period by which time the investment will more than triple in value?
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Approximation
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For this question, I'd use an annual interest rate of 33%. In other words, the investment will increase by 1/3 each year.1947 wrote:An investment compounds annually at an interest rate of 34.1% What is the smallest investment period by which time the investment will more than triple in value?
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Let's say we begin with $100, and see how many years it takes to exceed $300.
Year 0: $100
Year 1: $100 + 1/3 of $100 is about $133
Year 2: $133 + 1/3 of $133 = $133 + about $44 = $177
Year 3: $177 + 1/3 of $177 = $177 + about $58 = $235
Year 4: $235 + 1/3 of $235 = $235 + about $78 = more than $300
So, the answer is B
Cheers,
Brent