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

Question

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

Quizplus · Accepted Answer

Using the formula for compound interest:

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

Where: 
A = final amount 
P = principal amount (initial investment) 
r = annual nominal interest rate (as a decimal) 
n = number of times the interest is compounded per year 
t = time (years)

We can plug in the given values:

$50,000 = $15,000(1+0.12/1)^(1t) + $5,000(1+0.12/1)^(2t) + $5,000(1+0.12/1)^(3t) + ...

Simplifying:

$35,000 = $20,000(1.12)^t + $5,000(1.12)^(2t-1)

We can use trial and error or guess and check to find the value of t that satisfies the equation. It is approximately 11 years.

Therefore, the answer is A) 11 years.

Faisal Has $15 000 in His Savings Account and Can