Question

You decide to put $175 in a savings account to save for a $3,000 down payment on a new car. If the account has an interest rate of 3% per year and is compounded monthly, how long does it take you to earn $3,000 without depositing any additional funds?

Answer 1

montlhy interes = 3/12 % = 0.25%

175 (1+0.25)^x = 3000

175 (1.25)^x = 3000

1.25^x = 3000/175
1.25^x = 17.14
log (1.25^x) = log (17.14)
xlog(1.25) = log (17.14)
x = log(17.14) / log 1.25
x =1.234 / 0.0969
x = 12.7
Answer 13 months.