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A certain investment grows at an annual interest rate of 8%,

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Director
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A certain investment grows at an annual interest rate of 8%, [#permalink] New post 22 Nov 2007, 18:33
A certain investment grows at an annual interest rate of 8%, compounded quarterly. Which of the following equations can be solved to find the number of years, x, that it would take for the investment to increase by a factor of 16?

16 = (1.02) ^ x/4
2 = (1.02) ^ x
16 = (1.08) ^ 4x
2 = (1.02) ^x/4
1/16 = (1.02) 4x

We know compound quarterly formula = A = p(1 + r/4) ^4

What do they mean by factor of 16 ?
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Re: Compounded Quarterly - MGMT [#permalink] New post 22 Nov 2007, 18:46
alimad wrote:
A certain investment grows at an annual interest rate of 8%, compounded quarterly. Which of the following equations can be solved to find the number of years, x, that it would take for the investment to increase by a factor of 16?

16 = (1.02) ^ x/4
2 = (1.02) ^ x
16 = (1.08) ^ 4x
2 = (1.02) ^x/4
1/16 = (1.02) 4x

We know compound quarterly formula = A = p(1 + r/4) ^4

What do they mean by factor of 16 ?


Is the answer B: 2 = (1.02) ^ x

I think it means A/P = 16....it means the principal becomes 16 times.....
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 [#permalink] New post 22 Nov 2007, 18:51
spider : How did you get this :

Is the answer B: 2 = (1.02) ^ x

16 = (1.02) ^x/4
2^4 = (1.02) ^x/4

Is this right..
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 [#permalink] New post 22 Nov 2007, 19:24
alimad wrote:
spider : How did you get this :

Is the answer B: 2 = (1.02) ^ x

16 = (1.02) ^x/4
2^4 = (1.02) ^x/4

Is this right..

Alimad

16 = (1 + 2/100)^4x

2^4 = (1.02)^4x

so 4 = 4x or x = 1

Hence 2 = (1.02)^x
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 [#permalink] New post 22 Nov 2007, 19:28
hmm, but we have both of them in the answer choice. let me find the answer. Thanks spider.
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  [#permalink] 22 Nov 2007, 19:28
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