It takes 8 years for money to double with quarterly compounding if the annual interest rate is 8%.

Question

Quizplus · Accepted Answer

Using the formula for compound interest, $A = P(1 + \frac{r}{n})^{nt}$, where $A$ is the amount of money accumulated after n years, including interest, $P$ is the principal amount (the initial amount of money), $r$ is the annual interest rate (decimal), $n$ is the number of times that interest is compounded per year, and $t$ is the time the money is invested for in years. To double the money, $A = 2P$, so we solve for $t$ when $r = 0.08$ (8%), and $n = 4$ (quarterly compounding). This does not typically result in exactly 8 years; the exact time can be calculated using the formula, which often shows that money will double in less time than 8 years at an 8% interest rate with quarterly compounding.

It Takes 8 Years for Money to Double with Quarterly