Question

Veronica is trying to save money to do her graduate study in the USA and she can invest 25,000 CAD at an annual compound interest rate of 7.25%. She would need 40,000 CAD for her study. How long does she need to wait until her investment grows into the required 40,000 CAD?

Answer 1

Veronica needs to wait approximately 6.74 years until her investment of 25,000 CAD grows into 40,000 CAD.

Step-by-step explanation:

To find out how long Veronica needs to wait until her investment of 25,000 CAD grows into 40,000 CAD, we can use the formula for compound interest.

The formula for compound interest is:

A = P(1+r/n)^(nt)

Where:

• A is the total amount after time t
• P is the principal investment amount
• r is the annual interest rate (as a decimal)
• n is the number of times that interest is compounded per year
• t is the number of years

In this case, P = 25,000 CAD, r = 7.25% (or 0.0725 as a decimal), A = 40,000 CAD. We want to find t.

Plugging in the values, the equation becomes:

40,000 = 25,000(1 + 0.0725/1)^(1*t)

Simplifying the equation:

1.6 = (1.0725)^t

Taking the logarithm of both sides:

log(1.6) = t*log(1.0725)

Dividing both sides by log(1.0725):

t = log(1.6)/log(1.0725)

Using a calculator, we find that t is approximately 6.74 years.