What interest rate is required for an investment with continuously compounded interest to double in 8 years?

1 Answer
Oct 31, 2016

Answer:

At #8.66%#

Explanation:

An investment of #x# with continuously compounded interest at #r# (#r# expressed as fraction not in percentage term) is #xe^(rt)# in #t# years.

As it doubles in #8# years, we have #xe^(8r)=2x#

or #e^(8r)=2#

or #8r=ln2=0.69315#

or #r=0.69315/8=0.0866=8.66%#