Answer to Question #163139 in Financial Math for Adam sulemana

Question #163139
An amount of $100,000 is invested at an annual interest rate of 6.25%. If the interest is
calculated yearly, how long would it be before the investment reached $150, 000? What
is the answer if the interest is paid monthly?.
1
Expert's answer
2021-02-24T12:29:22-0500

If the interest is calculated yearly, then:

100,000×1.0625x=150,000,100,000×1.0625^x = 150,000,

log(1.0625)1.5=6.69\log(1. 0625) 1.5 = 6.69

years.

If the interest is paid monthly, then:

100,000×(1+0.0625/12)12x=150,000,100,000×(1 + 0.0625/12)^{12x} = 150,000,

log(1.0052)1.5/12=6.51\log(1.0052) 1.5/12 = 6.51 years.


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