Mai invests $20,000 at age 20. She hopes the investment will be worth $500,000 when she turns 40. If the interest compounds continuously, approximately what rate of growth will she need to achieve her goal? Round to the nearest tenth of a percent.

17.5% per annum

Step-by-step explanation:

Given:

Money invested = $20,000 at the age of 20 years.

Money expected to be $500,000 at the age of 40.

Time = 40 - 20 = 20 years

Interest is compounded annually.

To find:

Rate of growth = ?

Solution:

First of all, let us have a look at the formula for compound interest.

Where A is the amount after T years compounding at a rate of R% per annum. P is the principal amount.

Here, We are given:

P = $20,000

A = $500,000

T = 20 years

R = ?

Putting all the values in the formula:

So, the correct answer is 17.5% per annum and compounding annually.

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