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Question 15 of 43

Q.The sum of ₹ 2,000\text{₹ } 2{,}000 is compounded continuously, the nominal rate of interest being 5%5\% per annum. In how many years, will the amount be double the original principal ? (log⁡e2=0.6931)(\log_e 2 = 0.6931)

Tamil Nadu DgeTamil Nadu HSC (DGE) Commerce Board 2020Subjective· 3mImportance★★★★★
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With continuous compounding A=PertA = Pe^{rt}; doubling gives e0.05t=2e^{0.05t} = 2, so t=log⁡e20.05≈13.86t = \dfrac{\log_e 2}{0.05} \approx 13.86 years.

Model. Under continuous compounding the amount satisfies dAdt=rA\dfrac{dA}{dt} = rA, whose solution (separating variables) is

A=Pert,A = P e^{rt},

with principal P=2000P = 2000 and nominal rate r=5%=0.05r = 5\% = 0.05.

Step 1 — set amount to double the principal. A=2PA = 2P:

2P=Pe0.05t ⇒ e0.05t=2.2P = P e^{0.05 t} \ \Rightarrow\ e^{0.05 t} = 2.

Step 2 — take natural logarithms. …

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