PRC-2 · Chapter 5 · Question 23 of 50
According to the financial rule of compounding, if a specific sum is invested at a 12% nominal rate compounded semi-annually, roughly how many years will it take for the investment to exactly double?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) 6 years
Explanation
For money to double, (1 + i)^n = 2. Here, i = 6% (0.06) per semi-annual period. 1.06^n = 2. Solving with logs gives n ≈ 11.9 periods. Since there are 2 periods a year, this is roughly 6 years.
More Financial Mathematics MCQs
- Q25An investment of Rs. 1,000 grows to Rs. 1,500 over a period of 5 years with interest compounded annually. What is the approximate annual…
- Q26In financial mathematics, how does an 'Annuity Due' differ fundamentally from an 'Ordinary Annuity'?
- Q27A student deposited Rs. 10,000 in a simple interest account and earned exactly Rs. 4,000 in interest at a rate of 5% per annum. How many…
- Q28What is the proper financial definition of a 'sinking fund'?
- Q29If two identical lump sums are invested today for exactly one year, one at 10% simple interest and one at 10% interest compounded monthly…