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Answer:
-Ella have enough money($16,188.21) saved in six years to buy her home.
-It will take just over 10 yrs(10.24 yrs) for Ella’s account balance to exceed $20,000.
Step-by-step explanation:
#5% interest, compounded monthly, we calculate the effective annual interest rate:
The principal amount is $12,000 and the desired term is 6yrs. We calculate the compounded amount after 6yrs at :
Hence, Ella wont be able to make a down-payment at the end of 6 yrs since her investment of $16,188.21 <$20,000
To get how long she will be able to make the down-payment, we equate and make n the subject of the formula:
Hence, it will take just over 10 yrs for Ella’s account balance to exceed $20,000.