Question

Select the correct answer. Karishma deposits $350 in a savings account with an interest rate of 5% compounded twice per year. She knows that she should use the compound interest formula for this situation, where is the initial deposit, r is the interest rate, n is the number of times the interest is compounded per year, and t is the number of years. Which equation could she use to calculate the number of years it will take the value of the account to reach $700?

Answer 1

It takes $350 14 years to reach $700 with a semiannual interest rate of 2.5%.

Explanation:

Giving the following information:

Initial deposit (PV)= $350

Interest rate (r)= 0.05/2= 0.025

Number of perids (n)= ?

Future Value (FV)= $700

To calculate the time required to reach the objective, we need to use the following formula:

n= ln(FV/PV) / ln(1+r)

n= ln(700/350) / ln (1.025)

n= 28.07

28.07/2= 14

It takes $350 14 years to reach $700 with a semiannual interest rate of 2.5%.

Answer 2

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Explanation: