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24 November, 05:24

Find the number of interest periods to achieve the conditions set forth. A = $6000; P = $1000; interest is 12% compounded quarterly.

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  1. 24 November, 09:09
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    15.15 years

    Step-by-step explanation:

    recall that the formula for compound interest is:

    A = P [ 1 + (r/n) ] ^nt

    where,

    A = $6000

    P = $1000

    r = interest rate = 12% = 0.12

    to compound quarterly, n = 4

    we are asked to find t

    Substituting the above values into the equation:

    A = P [ 1 + (r/n) ] ^nt

    6000 = 1000 [ 1 + (0.12/4) ] ^ (4t)

    6000 = 1000 [ 1 + 0.03 ] ^ (4t)

    6000 = 1000 [1.03 ] ^ (4t) (divide both sides by 1000)

    6000/1000 = [1.03 ] ^ (4t)

    (1.03) ^ (4t) = 6 (applying log to both sides)

    log (1.03) ^ (4t) = log 6

    4t log (1.03) = log 6

    4t = log 6 / log 1.03

    t = (log 6 / log 1.03) / 4 (solve with calculator)

    t = 15.15 Years
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