Question

Matt invests $1,669 in a saving account with a fixed annual interest rate of 2% compounded 12 times per year. How long will it take for the account balance to reach 1,844.38?

Answer 1

Answer:

It will take 4.84 years

Step-by-step explanation:

The initial amount that Matt invested was $1669. It means that principal is

P = 1669

It was compounded 12 times per year. So

n = 12

The rate at which the principal was compounded is 2%. So

r = 2/100 = 0.02

The formula for compound interest is

A = P(1+r/n)^nt

A = total amount in the account at the end of t years.

A = 1,844.38

Therefore

1,844.38 = 1669(1+0.02/12)^(12×t)

1,844.38/1669 = (1.0017)^(12t)

1.1051 = (1.0017)^(12t)

Taking log to base 10 of both sides, it becomes

Log 1.1051 = log 1.0017^(12t)

Log 1.1051 = 12tlog 1.0017

0.043 = 0.00074 × 12t

0.043 = 0.00888t

t = 0.043/0.00888

t = 4.84 years