Question

Shawna invests $5,048 in a savings account with a fixed annual interest rate of 4% compounded 12 times per year. How long will it take for the account balance to reach $6,163.59?

Answer 1

Answer:

5 years

Step-by-step explanation:

In the question we are given;

• Amount invested or principal amount as $5048
• Rate of interest as 4% compounded 12 times per year
• Amount accrued as $6,163.59

We are required to determine the time taken for the money invested to accrue to the given amount;

Using compound interest formula;

$A=P(1+\frac{r}{100})^n$

where n is the interest period and r is the rate of interest, in this case, 4/12%(0.33%)

Therefore;

$6,163.59=5,048(1+\frac{0.333}{100})^n$

$1.221=(1+\frac{0.333}{100})^n$

$1.221=(1.0033)^n$

introducing logarithms on both sides;

$log1.221=log(1.0033)^n\\n=\frac{log1.221}{log1.0033} \\n=60.61$

But, 1 year = 12 interest periods

Therefore;

Number of years = 60.61 ÷ 12

                            = 5.0508

                            = 5 years

Therefore, it will take 5 years for the invested amount to accrue to $6163.59