Tim has a savings account with the bank. The bank pays him 1% per year. He has $5,000 and wonders when it will reach $5,300. When will his savings reach $5,300? If necessary, round the answer to the nearest whole number.

Considering interest is calculated yearly, it will take Tim approximately ___ year (s).

Question

Mathematics

Camila Nichols

16 February, 15:13

Tim has a savings account with the bank. The bank pays him 1% per year. He has $5,000 and wonders when it will reach $5,300. When will his savings reach $5,300? If necessary, round the answer to the nearest whole number.

Considering interest is calculated yearly, it will take Tim approximately ___ year (s).

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Answers (1)

Know the Answer?

Grace Warren · Answer 1

Assume interest is compounded at the end of each year, with a principal P over n years at interest i=0.01.

Future value = 5300

Then

Future value

= P (1+i) ^n

=>

5300=5000 ((1.01) ^n)

Solve for n

1.01^n=5300/5000=1.06

n=1.06^ (1/6) = 5.856 years.

If interest rate is 1% simple interest, then

n = (1.06-1) /.01=6 years.