Allie deposited $300.00 into a new savings account that earns 13% interest compounded quarterly. How long will it take for the balance to grow to $995.00? Round your answer to the nearest month. years and months

Answers

Answer 1

Answer:

Answer:

9 years 4 months

Step-by-step explanation:

To find out how long it will take for Allie's initial deposit of $300to grow to $995 in a savings account with a 13% annual interest rate compounded quarterly, we can use the compound interest formula:

$\boxed{\begin{array}{l}\underline{\textsf{Compound Interest Formula}}\n\nA=P\left(1+(r)/(n)\right)^(nt)\n\n\textsf{where:}\n\phantom{ww}\bullet\;\;\textsf{$A$ is the final amount.}\n\phantom{ww}\bullet\;\;\textsf{$P$ is the principal amount.}\n\phantom{ww}\bullet\;\;\textsf{$r$ is the interest rate (in decimal form).}\n\phantom{ww}\bullet\;\;\textsf{$n$ is the number of times interest is applied per year.}\n\phantom{ww}\bullet\;\;\textsf{$t$ is the time (in years).}\end{array}}$

In this case:

A = $995
P = $300
r = 13% = 0.13
n = 4 (quarterly)

Substitute the values into the formula and solve for t:

$995=300\left(1+(0.13)/(4)\right)^(4t)$

Simplify the expression inside the bracket:

$995=300\left(1.0325\right)^(4t)$

Divide both sides of the equation by 300:

$(995)/(300)=\left(1.0325\right)^(4t)$

Take natural logs (ln) of both sides of the equation:

$\ln\left((995)/(300)\right)=\ln\left(1.0325^(4t)\right)$

$\textsf{Apply the power law:} \quad \ln x^n=n \ln x$

$\ln\left((995)/(300)\right)=4t\ln\left(1.0325\right)$

Divide both sides of the equation by 4ln(1.0325) to isolate t:

$(\ln\left((995)/(300)\right))/(4\ln\left(1.0325\right))=t$

$t=(\ln\left((995)/(300)\right))/(4\ln\left(1.0325\right))$

Evaluate using a calculator:

$t=9.37184241...$

Therefore, it will take 9.37 years for the balance to grow to $995.00.

To determine the number of months, subtract 9 from the value of t and multiply by 12:

$\textsf{Months}=12(9.37184241...-9)=4.46210895...$

Therefore, it will take 9 years and 4 months (rounded to the nearest month) for the balance to grow to $995.00.

Additional comments

In the case of quarterly compounding, the interest is calculated and added to the account balance every three months (once every quarter). So, even though it will take 9 years and 4 months for the balance to reach $995.00, Allie's account will not show this exact amount at that specific time. It will show a balance of $979.61 at 9 years and 3 months, and a balance of $1,011.45 at 9 years and 6 months, so technically, the account balance will still show as $979.61 at 9 years and 4 months.

Answer 2

Answer:

Answer:

9 years and 4 months

Step-by-step explanation:

In order to calculate the number of years and months it will take for Allie's savings account balance to grow to $995.00, we can use the following compound interest formula:

$\sf A = P\left(1 + (r)/(n)\right)^(nt)$