Question

A person invests 4000 dollars in a bank. The bank pays 5.75% interest compounded quarterly. To the nearest tenth of a year, how long must the person leave the money in the bank until it reaches 5900 dollars?

Answer 1

t = 6.8 years

Explanation:

The formula for compound interest is

`A(t)=P(1+r/n)^n^t`, where P is the principal/amount invested, r is the interest rate, n is the number of compound periods per year (4 for quarterly), and t in the time in years.

We know that A = $5900, P = $4000, and r = 0.0575 (we must convert the percentage to a decimal). We must solve for t and round to the nearest tenth:

`5900=4000(1+0.0575/4)^(^4^t^)\\\\59/40=(1623/1600)^4^t\\\\log(59/40)=log(1623/1600^4^t)\\\\log(59/40)=4t*log(1623/1600)\\\\log(59/40)/log(1623/1600)=4t\\\\1/4(log(59/40)/log(1623/1600))=t\\\\6.80773607=t\\\\6.8=t`