Question

Mrs. Smith has $20,000 to invest. She wants to earn $10,000 in interest. She is considering a savingsand loans bank that is offering her 5.6% interest per year. For how long will she have to leave her money in the bank in order to reach her goal of $10,000?

Answer 1

Number of year to get $10,000 as interest = 7.5 year (Approx)

Explanation:

Given:

Initial investment = $20,000

Interest on investment = $10,000

Rate of interest = 5.6% = 0.056

Find:

Number of year to get $10,000 as interest:

Computation:

`Interest\ on\ investment = Initial\ investment[(1+r)^n-1]\\\\10,000 = 20,000[(1+0.056)-1]\\\\0.5=(1.056)^n-1\\\\1.5 =(1.056)^n\\\\n=7.44`

Number of year to get $10,000 as interest = 7.44

Number of year to get $10,000 as interest = 7.5 year (Approx)