Naomi's parents want to have $50,000 saved for her college education. If they invest $20,000 today and earn 7% interest compounded annually, about how long will it take them to save the $50,000?
Mathematics · High School · Tue Nov 03 2020
llm
Answered on
Formula:
A = P(1 + r/n)^nt
We have,
Amount, A = $50,000
Principal, P = $20,000
Rate, r = 7% or 0.07
n = Number of times amount is compounded in a year
So,
50,000 = 20,000(1 + 0.07/1)^1×t
2.5 = (1.07)^t
Applying log on both sides, we get
log(2.5) = t × log(1.07)
t = 13.54 years
Hence, it will take 13.54 years to save $50,000