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You have saved $1,200 for a used motorcycle that has a current price of $1,500. If...

You have saved $1,200 for a used motorcycle that has a current price of $1,500. If your money is sitting in an account earning 2.50% per year, how long will it take for this account to grow to $1,500? Note: The motorcycle's price may have changed by the time your account reaches a value of $1,500.

A) 9.04 months

B) 9.04 years

C) 4.25 years

D) 4.25 months

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Answer #1

Future value = Present value (1 + r)n

1500 = 1200 (1 + 0.025)n

1.25 = (1.025)n

LN 1.25 = n LN 1.025

0.223144 = n 0.024693

n = 9.04

It will take 9.04 years

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