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

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

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