Question

Suppose you deposit $5,000 in a savings account that earns 3% annual interest. If you make no other withdrawals or deposits, how many years will it take the account balance to reach at least $6,000? A. 10 years. B. 6 years. C. 7 years. D. 4 years

Answer 1

taking into consideration that the interest is compound (yearly)
the amount of money gather through the years can be calculated by

A = P (1+r)^(t)
6000 = 5000 (1.03)^t

t = ln(6000/5000)/ln(1.03) = 6.16 ≈ 7

c. 7 years

Answer 2

You need to use the equation y=p(1+r)^t where p= the principle (initial amount), r= the rate of decay or growth, and t= the time. So y=5,000(1.03)^x is the equation you'd want to use. At 6 years you'd have $5,970.3 and at 7 $6,149.40, so the answer is C.