Suppose a savings account pays 8% interest per year, compounded 6 times per year. If the savings accounts starts with $1,300, how long would it take for the savings account to exceed $6,800?
A) 20 years
B) 19 years
C) 22 years
D) 21 years

Question

Quizplus · Accepted Answer

The formula for compound interest is $A = P(1 + \frac{r}{n})^{nt}$, where $A$ is the amount of money accumulated after n years, including interest, $P$ is the principal amount (the initial amount of money), $r$ is the annual interest rate (decimal), $n$ is the number of times that interest is compounded per year, and $t$ is the time the money is invested for in years. Here, $P = 1300$, $r = 0.08$, $n = 6$, and we want to find $t$ such that $A > 6800$. Plugging the values into the formula and solving for $t$, we find that it takes slightly over 20 years for the account to exceed $6,800, thus the closest whole number of years is 21.

Suppose a Savings Account Pays 8% Interest Per Year, Compounded