Bytelearn - cat image with glassesAI tutor

Welcome to Bytelearn!

Let’s check out your problem:

You invest $2,000\$2,000 in a savings account that offers an annual interest rate of 5%5\%, compounded annually. How long will it take for your investment to grow to $3,000\$3,000?? \newlineUse the formula A=P(1+rn)ntA = P\left(1 + \frac{r}{n}\right)^{nt}, where AA is the balance (final amount), PP is the principal (starting amount), rr is the interest rate expressed as a decimal, nn is the number of times per year that the interest is compounded, and tt is the time in years. \newlineRound your answer to the nearest hundredth.

Full solution

Q. You invest $2,000\$2,000 in a savings account that offers an annual interest rate of 5%5\%, compounded annually. How long will it take for your investment to grow to $3,000\$3,000?? \newlineUse the formula A=P(1+rn)ntA = P\left(1 + \frac{r}{n}\right)^{nt}, where AA is the balance (final amount), PP is the principal (starting amount), rr is the interest rate expressed as a decimal, nn is the number of times per year that the interest is compounded, and tt is the time in years. \newlineRound your answer to the nearest hundredth.
  1. Identify values: Identify the values of PP, rr, nn, and AA.\newline P=2000P = 2000\newline r=0.05r = 0.05\newline n=1n = 1\newline A=3000A = 3000
  2. Use formula and solve: Use the formula A=P(1+rn)ntA = P\left(1 + \frac{r}{n}\right)^{nt} and solve for tt.\newline3000=2000(1+0.05)t3000 = 2000\left(1 + 0.05\right)^t
  3. Divide and simplify: Divide both sides by 20002000.\newline 30002000=(1.05)t\frac{3000}{2000} = (1.05)^t 1.5=(1.05)t1.5 = (1.05)^t
  4. Take natural logarithm: Take the natural logarithm (\ln) of both sides to solve for t t . \newlineln(1.5)=ln((1.05)t) \ln(1.5) = \ln((1.05)^t) ln(1.5)=tln(1.05)\ln(1.5) = t \cdot \ln(1.05)
  5. Isolate and solve: Divide both sides by ln(1.05)\ln(1.05) to isolate tt.\newline t=ln(1.5)ln(1.05)t = \frac{\ln(1.5)}{\ln(1.05)}
  6. Calculate value: Calculate the value of t t .\newline t=ln(1.5)ln(1.05)t = \frac{\ln(1.5)}{\ln(1.05)} t0.4054650.04879 t \approx \frac{0.405465}{0.04879} t8.31t \approx 8.31 It will take approximately 8.31 years for your investment to grow.

More problems from Compound interest: word problems