Question

A bank account earns 2.5% interest per year. If the account starts with $500, approximately how many years will it take for the value of the account to be $750?

Answer 1

Answer:

Step-by-step explanation:

Since we have an amount in the future of 750, we are going to use Future value formula; FV = PV (1+r)^t

where PV= Initial amount deposited

r= interest rate or discount rate

t = total duration of the investment

FV= 750

PV=500

r = 2.5% or 0.025 as a decimal

t = ?

Next, plug in the numbers into the formula;

750 = 500* (1+0.025)^t

divide both sides by 500;

750/500 = 1.025^t

Introduce ln on both sides

ln 1.5 = ln $1.025^{t}$

ln 1.5 = t ln 1.025

0.4054651 = 0.0246926 t

Divide both sides by 0.0246926 to solve for t;

0.4054651/0.0246926 = t

t = 16.42

Therefore it will take 16.42 years