Answer:
0.57 yr
Step-by-step explanation:
To find the doubling time with continuous compounding, we should look at the formula:
[tex]FV = PVe^{rt}[/tex]
FV = future value, and
PV = present value
If FV is twice the PV, we can calculate the doubling time, t
[tex]\begin{array}{rcl}2 & = & e^{rt}\\\ln 2 & = & rt\\t & = & \dfrac{\ln 2}{r} \\\end{array}[/tex]
1. David's doubling time
[tex]\begin{array}{rcl}t & = & \dfrac{\ln 2}{0.06125}\\\\& = & \textbf{11.317 yr}\\\end{array}[/tex]
2. Violet's doubling time
The formula for interest compounded periodically is
[tex]FV = PV\left (1 + \dfrac{r}{n} \right )^{nt}[/tex]
where
n = the number of payments per year
[tex]\begin{array}{rcl}9600 & = & 4800\left (1 + \dfrac{0.065}{4} \right )^{4t}\\\\2 &= & (1 + 0.01625 )^{4t}\\& = & 1.01625^{4t}\\\ln 2& = & 4 (\ln 1.01625)\times t \\& = & 0.064478t\\t& = & \dfrac{\ln 2}{0.064478}\\\\& = & \textbf{10.750 yr}\\\end{array}[/tex]
3. David's doubling time vs Violet's
11.317 - 10.750 = 0.57 yr
It would take 0.57 yr longer for David's money to double than Violet's.
