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45 votes
45 votes
A person invests 3500 dollars in a bank. The bank pays 4.75% interest compounded

quarterly. To the nearest tenth of a year, how long must the person leave the money
in the bank until it reaches 5800 dollars?

User REJH
by
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1 Answer

12 votes
12 votes

9514 1404 393

Answer:

10.7 years

Explanation:

The formula for the balance in an account earning compound interest is ...

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

where principal P is invested at annual rate r compounded n times per year for t years. We want to solve for t.

5800 = 3500(1 +0.0475/4)^(4t)

58/35 = 1.011875^(4t) . . . divide by 3500 and simplify a bit

log(58/35) = 4t·log(1.011875) . . . . take logs

t = log(58/35)/(4·log(1.011875)) . . . . divide by the coefficient of t

t ≈ 10.6966 ≈ 10.7

The person must leave the money n the bank for about 10.7 years for it to reach $5800.

User Isatu
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