Problema Solution
You have saved $7,000 towards the purchase of a car costing $9,000. How long will the $7,000 have to be invested at 9% compounded monthly to grow to $9,000? (Round up to the next-higher month if not exact.)
Answer provided by our tutors
P = $7,000
r = 0.09 or 9%
A = $9,000
t = the time in months
A = P(1 + r/12)^t
7000(1 + 0.09/12)^t = 9000
1.0075^t = 9000/7000
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click here to see the equation solved for t
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t = 33.63 months or 34 months rounded to the next higher month
The money should be compounded monthly for 34 months.