Johan invests $4,000 at age 22 from the signing bonus of his new job. He hopes the investment will be worth $240,000 when he turns 66. If the interest compounds continuously, approximately what rate of growth will he need to achieve his goal? Round to the nearest tenth of a percent.

The interest rate needs to be 9.8% for the sum of $4000 to compound to $240,000

Step-by-step explanation:

Since the interest compounds itself, hence the question concerns the compound interest.

Details provided-

Principal (Initial contribution)- $ 4000

Amount (Expected amount)- $ 240,000

Time period- investment started at 22 years and would continue until 66 years.

Time period= 66-22 years= 44 years

Rate of interest=

We know that for compound interest-

⇒Amount= principal (1+rate/100)ⁿ

Substituting the values if Amount, principal and time ("n") in the above equation

240,000= 4000 (1+rate/100) ⁴⁴

240,000/4000= (1+rate/100) ⁴⁴

Solving the above equation would yield us with the rate as 9.75% ≈ 9.8% (rounded off to tenth place after decimal)

Hence the Interest rate required by John would be 9.8%

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