Question

$500 is deposited in an account which bears 12%p.a interest compound monthly. Use the compound interest formula to find the number of years it would take to accumulate $500 to $806.11

Answer 1

$A=P(1+\frac{r}{n})^{n×t}$

for compounded monthly n=12

$806.11=500(1+\frac{0.12}{12})^{12×t}$

$806.11=500(1.01)^{12t}$

$806.11/500=(1.01)^{12t}$

$1.61222=(1.01)^{12t}$

log1.61222=$12tlog1.01$

$12t=log1.61222/log1.01=48.0$

$t=48/12=4yrs$