Rhonda deposited $4,227.29 into a savings account with an interest rate of 4.9% compounded monthly. About how long will it take for the account to be worth $9,000?

Question

anonymous · Answer

Do you know what the formula looks like that you should use?

anonymous · Answer

no im just starting my class and its a pretest so i really dont know any formulas

anonymous · Answer

Ok, well the way it works is you start with some initial amount, A. A gets a percentage of itself added on, A +RA where R is the interest rate.

anonymous · Answer

The A can be factored out so it looks like this A(1+R). This multiplication by (1+R) happens a number of times equal to the number of compounding periods, T.

anonymous · Answer

So the final amount, F is:
$$F=A(1+R)^T$$

anonymous · Answer

You just have to keep in mind that R will depend on how often the compounding is being done. Interest rates are given as 'per year' so if it's compounded twice a year, R=annual interest rate divided by 2. If it's monthly, then R=APR/12. (APR=annual percentage rate).

Also, the number of compounding periods has to be consistent with how often the compounding happens. e.g. if the compounding is monthly, and it's for 5 years, then there are 12×5=60 compounding periods.

anonymous · Answer

That's all the background info you need. Make sense so far?