Question

Stacy invests $1, 200 at 7% interest compounded quarterly. After 5 years, how much money will Stacy have? After 10 years how much money will Stacy have? How long will it take for Stacey to reach $3, 500?

I got t=0.266/ln 1.0175

Answer 1

Assuming 7% interest annually

Let A be the amount after 't' period of time, and n = 4 be the number of times the amount is compounded a year. Also let the principal amount be P = 1200 and the rate r = 7%

Using the formula , we get

i) With t = 5 years, we have

A = = $1697

ii) With t = 10 years, we have

A = = $2401

iii) For Stacy to have $3500, we need time period of t

That is

or

Taking log on both sides

log(3500/1200) = 4t log(1.0175)

or t = 0.266/ln 1.0175