Question

You’re trying to save to buy a new $230000Ferrari. You have $31000 today that can be invested at your bank. The bank pays 4.5 percent annual interest on its accounts. How long will it be before you have enough to buy the car? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Answer 1

We can use the formula for compound interest to find the time it will take to reach the target amount:

FV = PV * (1 + r)^t

where FV is the future value (target amount), PV is the present value (amount you have today), r is the interest rate, and t is the time (in years).

Substituting the given values, we get:

230000 = 31000 * (1 + 0.045)^t

Simplifying and solving for t, we get:

t = log(230000/31000) / log(1 + 0.045)

t ≈ 14.09

Therefore, it will take approximately 14.09 years to save enough to buy the Ferrari.