Question

Ella invested $4,900 in an account paying an interest rate of 3% compounded monthly. Assuming no deposits or withdrawals are made, how long would it take, to the nearest tenth of a year, for the value of the account to reach $5,920?

Answer 1

To solve this problem we can use the formula for future value of an investment, which is:

FV = PV(1+r)^t

Where PV is the present value, r is the interest rate, t is the number of years, and FV is the future value.

In this case, we know that PV = $4,900, r = 3% = 0.03, and FV = $5,920.

So we can rearrange the formula to solve for t:

t = log(FV/PV) / log(1+r)

t = log($5,920 / $4,900) / log(1+ 0.03)

t ≈ 10.3 years

Therefore, it would take approximately 10.3 years for the account to reach $5,920.