Ella invested 4,900 in an account paying an interest rate of 3% compounded monthly. Assuming no deposits or withdrawals are made, how long would it take, to the nearest tenth of a year, for the value of the account to reach 5,920?

Solution

Ell a in v es t e d 4, 900 in an a cco u n t p a y in g an in t eres t r a t e o f 3% co m p o u n d e d m o n t h l 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 t e n t h o f a 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 5, 920 ?

Time : 6.31

Solution steps

Translate the problem into an equation:

5920 = 4900 (1 + \frac{0.03}{12})^{12 t}

Solve for

t, 5920 = 4900 (1 + \frac{0.03}{12})^{12 t} : t = 6.31

Time : 6.31