Question

A man invested $10,000 in the bank. if the account pays 5% pa interest compounded monthly, how long would take for the man to accumulate $2000 interest.

Answer 1

Answer:

3.63 years

Step-by-step explanation:

The formula would be of compound growth, which is:

$F=P(1+\frac{r}{n})^{nt}$

Where

F is future amount (with interest)

P is initial deposit

r is rate of interest in a year

n is number of compounding in 1 year

t is the time in years

Given in this problem:

To accumulate 2000 interest means the future amount will be:

10000+2000 = 12,000

Present amount is 10,000

r is the annual interest, which is 5% or 0.05

compounded monthly means, 12 times a year, so n = 12

t is time in years, which we need to find

Substituting, we have:

$F=P(1+\frac{r}{n})^{nt}\\12000=10000(1+\frac{0.05}{12})^{12t}\\1.2=(1.0042)^{12t}\\Ln(1.2)=Ln((1.0042)^{12t})\\Ln(1.2)=12t*Ln(1.0042)\\12t=\frac{Ln(1.2)}{Ln(1.0042)}\\12t=43.50099\\t=3.63$

The time it will take is around 3.63 years