Question

I'm more sophisticated than my little sister. I save my money in a bank account that pays me 3% interest on the money in the account at the end of each month. (If I take my money out before the end of the month, I don't earn any interest for the month.) I started the account with $50 that I got for my birthday. How much money will I have in the account at the end of 10 months? How many months will it take to have at least $100? Justify your answer with a mathematical model of the problem situation.

Answer 1

`~~~~~~ \textit{Compound Interest Earned Amount} \\\\ A=P\left(1+(r)/(n)\right)^(nt) \quad \begin{cases} A=\textit{accumulated amount}\\ P=\textit{original amount deposited}\dotfill &\$50\\ r=rate\to 3\%\to (3)/(100)\dotfill &0.03\\ n= \begin{array}{llll} \textit{times it compounds per \underline{month}} \end{array}\dotfill &1\\ t=\underline{months}\dotfill &10 \end{cases} \\\\\\ A=50\left(1+(0.03)/(1)\right)^(1\cdot 10) \implies A=50(1.03)^(10)\implies A \approx \text{\LARGE 67.20}`

well, let's check how long till you'd have $100 first

`~~~~~~ \textit{Compound Interest Earned Amount} \\\\ A=P\left(1+(r)/(n)\right)^(nt) \quad \begin{cases} A=\textit{accumulated amount}\dotfill & \$100\\ P=\textit{original amount deposited}\dotfill &\$50\\ r=rate\to 3\%\to (3)/(100)\dotfill &0.03\\ n= \begin{array}{llll} \textit{times it compounds per \underline{month}} \end{array}\dotfill &1\\ t=\underline{months} \end{cases}`

`100=50\left(1+(0.03)/(1)\right)^(1\cdot t) \implies 100=50(1.03)^t\implies \cfrac{100}{50}=1.03^t \\\\\\ 2=1.03^t\implies \log(2)=\log(1.03^t)\implies \log(2)=t\log(1.03) \\\\\\ \stackrel{\textit{about 23 months and 13 days}}{\cfrac{\log(2)}{\log(1.03)}=t\implies \text{\LARGE 23.45}\approx t}`