Ellie wants to give her granddaughter a present of $500 saved in a bank account. If Ellie puts $350 in the account which earns an 8% annual interest rate, how long must she wait before the account is worth $500?
Detailed Explanation
The interest amount is $150, which is the difference between the desired amount and what Ellie originally deposits. You can use the interest formula: I = Prt, where I interest, P is principal, r is rate, and t is time. Just plug in I = 150, P = 350, and r = 0.08, and solve for t: 150 = 350(0.08)t =28t = 150t ÷ 28 = 5.36 years, or approximately 5 years 4 months.
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