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Not sure what this questions means by "part of a year"? What assumptions should be made?

Question: How long will it take to triple your money at a nominal interest rate j1 = 12% if simple interest is allowed for part of a year?

Can anyone help?

Gregggg
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  • If you reach the end of the year, the interest is capitalised and you get "compound interest" such as $C(1+r)^t$. If you stop within a year, you cash "simple interest" such as $C(1+rt)$. You should find $t=a.d$ (where $a$ is year and $d$ is days) such that $C(1.12)^a(1+0.12 (d/365))$ solves your problem. – mlc Mar 26 '18 at 18:41

1 Answers1

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Let $P$ be your money: $$P(1+jt)=3P\qquad\Longrightarrow\qquad 1+jt=3\qquad\Longrightarrow\qquad t=\frac{2}{12\%}=16.\bar6\,\text{years}$$ that is $16$ years and the fractional part $\frac{2}{3}=0.\bar6$ year (i.e. 8 months)

alexjo
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