1. ## mathematics in finance

The question in my book is so vague I don't understand it ??? I don't even know what formula to us for this is have a list of formulas too.

How long will it take money to double if it is invested at 7.5% compounded daily? 7.5% compounded annually?

2. ## Re: mathematics in finance

Originally Posted by ossie4
The question in my book is so vague I don't understand it ??? I don't even know what formula to us for this is have a list of formulas too.

How long will it take money to double if it is invested at 7.5% compounded daily? 7.5% compounded annually?
1. The amount of money at the time t is:

$\displaystyle A(t)=A(0) \cdot \left(1+\frac p{100} \right)^t$

2. Let A(0) = 1 $. Then A(t) = 2$

If the invested money is compounded daily then the percentage will be $\displaystyle \frac{0.075}{365}$. Thus you have to solve for t:

$\displaystyle 2 = 1 \cdot \left(1+\frac{0.075}{365} \right)^t$

I've got $\displaystyle t \approx 3374 d = 9 a 88 d$

3. If the invested money is compounded annually then the percentage will be 0.075. Thus you have to solve for t:

$\displaystyle 2 = 1 \cdot \left(1+0.075 \right)^t$

I've got $\displaystyle 9.584 a \approx 9 a 213 d$

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