Question

You are saving for a car. You put $750 in an account that has an interest rate of 3% compounded semi-annually (twice a year).

When will you have enough for a $1500 car? Round to the nearest year.

Answer?

Answer 1

Explanation:

Two periods (semi-annual) per year

decimal interest per period = i = .03/2 = .015

pv = present value = 750

fv = future value = 1500

fv = pv (1 + i ) ^2t where t = years

1500 = 750 ( 1 + .015)^2t <==== solve for t

2 = 1.015 ^(2t)

log 2 = 2t log (1.015)

t = 23 years