Question

$300 was deposited in a Certificate of Deposit (CD) yielding 6% interest compounded quarterly. how many years will it take the CD to reach a value of $876.34?

Answer 1

The future value (A) of a one-time investment of principal amount P at interest rate r compounded n times per year for t years is ...

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

Putting your given numbers into the formula, we have

... 876.34 = 300(1 +.06/4)^(4t)

Taking logarithms, this becomes the linear equation

... log(876.34) = log(300) + 4t·log(1.015)

Solving for t in the usual way, we get

... log(876.34) -log(300) = 4t·log(1.015) . . . . . . . subtract the constant term on the right

... (log(876.34) -log(300))/(4·log(1.015)) = t ≈ 18.00 . . . . divide by the coefficient of t

It will take 18 years for the $300 CD to reach a value of $876.34.