Question

Mary received $10,000 from a lawsuit settlement. She deposited the money into an account earning 3.2% compounded monthly How much money will the account be worth in 5 years? How much interest did Marý eam? b. How long will it take before she has 50,000 in her account? Round to 2 decimal places. a. C.

Answer 1

Answer

a)

FV=PV*(1+i)^n

FV=future value =?

Present value =PV=10000

n=months=5*12=60

i=interest rate per month effective =3.2/12=0.266666667

FV=10000*(1+0.00266666667)^60

=11732.6099

the amount after 5 years is $11732.6099

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b)

Interest amount =FV-PV=11732.6099-10000=1732.6099

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c)

n=ln(FV/PV)/ln(1+i)

=ln(50000/10000)/(ln(1+0.00266666667))

=604.343578

years =number of months /12

=604.343578/12

=50.3619648

it will take 50.36 years to be $50000