Question

If Sarah invests $5,000 into a fund that earns 6% interest compounded annually, how long will it take for her investment to grow into $50,000?

About 20 years


About 40 years


About 35 years


About 4 years

Answer 1

40

Explanation:

so next year her money would be 6% more so:

5000 + (0.6 * 5000) = (1.06) * 5000

So each year she'll have : (1.06)*(last year's money)

So we can say after n years she will have :

((1.06)^n) * 5000

So:

5000((1.06)^n)=50000

n is 39.5

So around 40