At an effective annual interest rate of 20 percent,how many years will it take a given amount to triple in value? (Round to the closest year. )
A) 5
B) 8
C) 6
D) 10
E) 9

Question

Quizplus · Accepted Answer

To triple in value means the amount will increase by a factor of 3. 
Using the formula for compound interest: FV = PV(1+i)^n, where FV is the future value, PV is the present value, i is the interest rate, and n is the number of compounding periods: 
3 = 1*(1+0.20)^n 
Taking the natural log of both sides: 
ln(3) = n*ln(1.20) 
n = ln(3)/ln(1.20) = 5.65 years. 
Rounding to the nearest year: 
it will take 6 years for the amount to triple in value. 
Therefore, the answer is C.

At an Effective Annual Interest Rate of 20 Percent,how Many