Question

A person invests 10000 dollars in a bank. The bank pays 4.5% interest compounded
annually. To the nearest tenth of a year, how long must the person leave the money
in the bank until it reaches 13500 dollars?

Answer 1

The person would have to leave the money in the bank for 7.8 years for it to reach 13,500 dollars.

Step-by-step explanation:

Step 1; First we must calculate how much interest is generated for a single year. The annual interest rate is 4.5% i.e. 4.5% of 10,000 dollars which equals 0.045 × 10,000 = 450 dollars a year. As the years pass, more and more will be put into the account due to interest.

Step 2; For there to be 13,500 dollars in the bank account we need to calculate how much money is added due to interest.

The money needed to be added through interest = 13,500 - 10,000 = 3,500 dollars.

So we need to determine how long it will take for the bank to add 3,500 dollars by adding 450 dollars a year.

The number of years to reach 13,500 dollars = $\frac{3,500}{450}$ = 7.777 years. By rounding this value to the nearest tenth, we get 7.8 years.