Question

Sasha owns two investments, A and B, that have a combined total value of 47,300 dollars. Investment A is expected to pay 24,800 dollars in 7 year(s) from today and has an expected return of 5.82 percent per year. Investment B is expected to pay 43,954 dollars in T years from today and has an expected return of 6.03 percent per year. What is T, the number of years from today that investment B is expected to pay 43,954 dollars? Round your answer to 2 decimal places (for example, 2.89, 14.70, or 6.00).

Answer 1

Answer:

Investment A:

Future Value = $24,800
Expected Return = 5.82%
Time Period = 7 years

Present Value of Investment A = $24,800 / 1.0582^7
Present Value of Investment A = $23,434.47

Investment B:

Present Value of Investment B = Total Investment - Present Value of Investment A
Present Value of Investment B = $47,300 - $23,434.47
Present Value of Investment B = $23,865.53

Future Value = $43,954
Expected Return = 6.03%
Time Period = T years

$23,865.53 = $43,954 / 1.0603^T
1.0603^T = 1.841736
T * ln(1.0603) = ln(1.841736)
T = ln(1.841736) / ln(1.0603)
T = 10.43

Therefore, investment B is expected to pay $43,954 in 10.43 years.