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Glen wants to take a holiday that costs $8,850, but currently he only has $2,750 saved. if he invested his money at 8 percent interest compounded annually, how long will he have to wait to take his holiday? use a financial calculator to make the calculation.

User Kroegerama
by
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1 Answer

5 votes
Solution:

A = P(1+r)^n

where,
A = amount
P = principal
r = rate of interest
n = number of years

Putting values in the formula,

8850 = 2750(1+0.08)^n

8850/2750 = (1+0.08)^n
log will be used to solve "n" as it is in the exponent form, which gives,

log(8850/2750) = n log(1+0.08)

By solving, we get n = log(8850/2750) / log(1+0.08)

Using financial calculator, value comes as 15.187 rounded to 15.19.

So, he will have to wait for 15.19 years to take holidays as it will take 15.19 years to make $8850 from $2750 @ 8% annual compounding.

User Khaled Awad
by
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