Question

You expect to receive a payout from a trust fund in 5 years. The payout will be for $11,400. You plan to invest the money at an annual rate of 6.2 percent until the account is worth $19,600. How many years do you have to wait from today?

Answer 1

Future value of account = $19600

Annual rate = 6.2 percent

Payout amount i.e. investment amount = $11400

Let number of years is n for $11400 to be grown as $19600.

$11400*(1.062)^n = $19600

(1.062)^n = $19600/$11400

(1.062)^n = 1.71

So, n = 9 years i.e. value of (1.062)^9 = 1.71

It will take around 9 years for $11400 to be grown as $19600 from 6th year on wards.

Total years from today = 9 years + 5 years = 14 years

So, We have to wait for 14 years from today.