Question

1. James deposits $100 into a bank account that earns an annual interest rate of 4 percent. If he

does not make any additional deposits and makes no withdrawals, how long will it take him, in
years, to increase the value of his account by at least 60 percent?

12
15
25
30

Answer 1

Compound interest is interest computed on the original principal as well as on any accumulated interest.

If you deposit P dollars at rate r, in decimal form, subject to compound interest, then the amount, A, of money in the account after t years is given by

The amount A is called the account's future value and the principal P is called its present value.

From the information given we know that $500 is the present value, 6% is the rate, and we want to find how long will it take for Suzy to earn at least $95, this means when the future value is $595.

Applying the above formula and solving for t we get that:

Explanation: