Question

Rick puts $6500 in a high interest money market account at 4.36% annual interest

compounded monthly. Assuming he makes no deposit or withdrawals, how long will it
take for his investment to grow to $7000?
A. 2 years
B. 7.1 years
C. 1.6 years
D. 1.7 years
E. None of them

Answer 1

D. 1.7 years

Explanation:

7000 = 6500(1 + 4.36%/12)^t

Where t is the no. of months

7000/6500 = (1.003633333)^t

Apply ln both sides

ln(14/13) = t ln(1.0109)

t = 20.43372117 months

Divide by 12 for no. of years

1.702810098 years