Faisal has $15,000 in his savings account and can save an additional $5000 per year.If interest rates are 12%,how long will it take his savings to grow to $50,000?
A)2 years
B)3 years
C)4 years
D)5 years

Question

Faisal has $15,000 in his savings account and can save an additional $5000 per year.If interest rates are 12%,how long will it take his savings to grow to $50,000?
A)2 years 
B)3 years 
C)4 years 
D)5 years

Quizplus · Accepted Answer

Let's use the formula for compound interest:

A = P(1+r/n)^(nt)

where: 
A = final amount ($50,000)
P = initial amount ($15,000)
r = interest rate (12% or 0.12)
n = number of times compounded per year (assume annually)
t = number of years

Substituting the values:

$50,000 = $15,000(1+0.12/1)^(1t)
(1+0.12)^(t) = 50,000/15,000
(1.12)^(t) = 3.33
t = log(3.33)/log(1.12)
t ≈ 4.4

Therefore, it will take about 4 years and 5 months to grow his savings to $50,000, which is closest to option C: 4 years.

Faisal Has $15,000 in His Savings Account and Can Save