Question

Salma needs $7945 for a future project. She can invest $5000 now at an annual rate of 8.6% compounded semiannually. Assuming that withdrawals are made, how long will it take for her to have enough money for her project?

Answer 1

Salma will need approximately 2.391 years to have enough money for her project.

Step-by-step explanation:

To calculate how long it will take for Salma to have enough money for her project, we need to use the compound interest formula:

• A = P(1 + r/n)^(nt)

Where:
A is the future amount of money
P is the initial amount of money
r is the interest rate (as a decimal)
n is the number of times interest is compounded per year
t is the number of years

In this scenario, P = $5000, r = 8.6% (or 0.086 as a decimal), n = 2 (since interest is compounded semiannually), and we need to solve for t.
Plugging in the values, we have:
$7945 = $5000(1 + 0.086/2)^(2t)

By solving this equation for t, we find that it will take Salma approximately 2.391 years to have enough money for her project.