Page 4 vi) Suppose the general level of inflation in the economy average is 12%

Question

Page 4 vi) Suppose the general level of inflation in the economy average is 12% per year. Find the number of years it would take for the overall level of prices to double. a. 7 years b. 6 years c. 10 years d. 9 years vii) At the end of each quarter, Aly deposits $ 200 into a saving account that pays 4 % compounded quarterly for 15 years. After the 15 years, he took the accumulated amount and deposited it into another saving account that pays 9 % compounded daily for 2 years. How much will Aly have at the end? a. $69082.24 c $41449.34 d $29332.25 b. $19554.84

Explanation / Answer

vi)

Rate, r = 12% per year

So, to double the principle deposited let it take n years

So, 2p = p *(1+r/100)^n

2 = (1+.12)^n

Log2 = n*Log(1.12)

Log2/Log1.12 = n
n = 6.12 or 7 years

A. is the right answer

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