Would you double your money sooner with a compound interest rate of 5% or a simple interest rate of 6%?
2007-03-19 03:15:53 · 3 answers · asked by Anonymous in Business & Finance ➔ Personal Finance
It really depends how quickly it compounds... but most are monthly. The formula to determine this is
P (1+r/t)^t
where P = principle, r = rate, t = time
In this case, it'd be P (1+0.05/12)^12
The APR of 5% yields APY of 5.11619%
The time needed to double your money is 14.07297285 years, whereas the time needed to double your money at 6% simple interest is 12 years. (To find this, use the rule of 72.... 72/APY = Years it takes to double the principle.)
2007-03-19 03:43:51 · answer #1 · answered by Anonymous · 1⤊ 0⤋
6% in 12 years
2007-03-19 03:19:12 · answer #2 · answered by Jo Blo 6 · 0⤊ 0⤋
6% interest will double your investment in 16.67 years. (100 divided by 6)
5% compounded will double your money in about 14.4 years (that's not precise--i used the rule of "72". but it's close enough to answer your question.)
2007-03-19 04:55:44 · answer #3 · answered by Ovrtaxed 4 · 0⤊ 1⤋