Amanda put P500,000 in a bank that pays 14% interest converted semi-annually. If she decides to withdraw her money when it grows to P750,000, when should she withdraw her money?
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Amanda put P500,000 in a bank that pays 14% interest converted semi-annually. If she decides to withdraw her money when it grows to P750,000, when should she withdraw her money?
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Answer:
We can use the formula for compound interest to calculate the number of years it will take for Amanda's investment to grow to P750,000:
A = P(1 + r/n)^(nt)
Where:
A = the final amount (750,000 in this case)
P = the initial principal (500,000 in this case)
r = the annual interest rate (14% in this case)
n = the number of times the interest is compounded per year (semi-annually in this case)t = the number of years the money is invested (unknown)
We can solve for t by rearranging the formula to:
t = log(A/P) / log(1 + r/n)
If we substitute the given values:
t = log(750,000/500,000) / log(1 + 14/(2*100))
t is about 3.3 years. Therefore Amanda should withdraw after 3.3 years.
Step-by-step explanation:
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