Question

Ella invested $2,700 in an account paying an interest rate of 5.4% compounded

monthly. Assuming no deposits or withdrawals are made, how long would it take, to
the nearest year, for the value of the account to reach $4,020?

Answer 1

7.4 years

Explanation:

This is a compound interest question, from the question, we know we are to find the time.

The formula for Time in compound interest =

t = ln(A/P) / n[ln(1 + r/n)]

Where:

A = Amount after time t = $4,020

P = Principle = Initial amount invested = $2700

r = Interest rate = 5.4% = 0.054

t = ??

n = compounding frequency = monthly = 12

t = ln(A/P) / n[ln(1 + r/n)]

t = In(4020/2700)/12[In(1 + 0.054/12)]

t = 7.388 years

Approximately = 7.4 years