Matthew invested 5,300 in an account paying an interest rate of 2.1% compounded annually. Assuming no deposits or withdrawals are made, how long would it take, to the nearest year, for the value of the account to reach 6,020?

Solution

M a tt h e w in v es t e d 5, 300 in an a cco u n t p a y in g an in t eres t r a t e o f 2.1% co m p o u n d e d ann u a ll y . A ss u min g n o d e p os i t s or w i t h d r a w a l s a re ma d e, h o w l o n g w o u l d i t t ak e, t o t h e n e a res t ye a r, f or t h e v a l u e o f t h e a cco u n t t o re a c h 6, 020 ?

Time : 6.13

Solution steps

Translate the problem into an equation:

6020 = 5300 (1 + \frac{0.021}{1})^{1 \cdot t}

Solve for

t, 6020 = 5300 (1 + \frac{0.021}{1})^{1 \cdot t} : t = 6.13

Time : 6.13