Question

Susie needs to make $100,000 to pay her home mortgage and has $10,000 to invest. How much interest will she need if her bank compounds the interest annually to reach her goal?

Answer 1

Let's use the compound interest formula:

`\begin{gathered} A=P(1+(r)/(n))^(nt) \\ \text{Where:} \\ A=\text{Amount}=100000 \\ P=\text{Initial investment}=10000 \\ r=\text{ Interest rate} \\ n=\text{Number of times interest is compounded per unit t}=1 \\ t=\text{time}=4 \end{gathered}`
`\begin{gathered} 100000=10000(1+r)^(1\cdot1) \\ 10=(1+r) \\ 10=1+r \\ r=9 \end{gathered}`