Albend Holmes wants to deposit $4,500 in a bank account that pays 8.25 percent annually. How many years will it take for his investment to grow to $10,000? (Round off to the nearest year.)
A) 8 years
B) 11 years
C) 10 years
D) 12 years

Question

Quizplus · Accepted Answer

To find out how many years it will take for an investment to grow to a certain amount, you can use the rule of 72, which is a simplified way to determine how long an investment will take to double, given a fixed annual rate of interest. However, in this case, since we're not exactly doubling, we'll directly apply the formula for compound interest: A = P(1 + r/n)^(nt), where A is the amount of money accumulated after n years, including interest, P is the principal amount ($4,500), r is the annual interest rate (8.25%), n is the number of times that interest is compounded per year, and t is the time the money is invested for in years.Given that the interest is compounded annually (n = 1) and we're solving for t, we rearrange the formula to solve for t:$10,000 = $4,500(1 + 0.0825)^tSolving for t gives us approximately 10 years.

Albend Holmes Wants to Deposit $4,500 in a Bank Account