Find the time required for an investment of 15,000 to grow to 19,000 at an annual interest rate of 5% if interest is compounded yearly .

Question

Find the time required for an investment of 15,000 to grow to 19,000 at an annual interest rate of 5% if interest is compounded yearly .

Answer 1

The formula for your interest problem is A = P(1 + r)^t . You're given A=19000 and P=15000 and r =.05. You'll need logarithms to solve this.

 

19000 = 15000(1+.05)^t              divide both side by 15000

1.266666=1.05^t                          take the log of both sides....log is used to solve equations that have variables as 

                                                 exponents

log 1.26666=log1.05^t                  use the exponent rule for logs

log 1.26666=t*log1.05                divide by log1.05and the calculator to get

.10266/.02119 = t

4.845          =  t

 

So approximately 5 years.... but since it didn't specify to round off, I'd leave it as 4.845 years

 

Hope this helped