5
QuizMultiple Choice

Banking — Test

Question 5 • Financial Math

A customer invests $⁢18,000 in a certificate of deposit. It compounds 4.2% interest monthly and has a final value of $⁢21,286.61 Write an exponential equation and use a graphing calculator to find x , the time in years it will take to reach this amount. Round to the nearest whole number if necessary.

Answer
A
2 years
B
5 years
C
4 years
D
3 years

Explanation

Use the compound-interest equation A = P(1 + r/n)^(nx). Here, 21,286.61 = 18,000(1 + 0.042/12)^(12x). Solving gives x = ln(21,286.61/18,000) ÷ [12 ln(1 + 0.042/12)] ≈ 4 years, so the correct choice is 4 years.

AI-written and checked against the verified answer.

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