Question 1
Sol:
Present value (PV) = $100,000
Future value (FV) = $500,000
Annual interest rate = 9.15%
To determine how many years it will take for the investment to grow we can use NPER function in excel:
FV |
500,000 |
PV |
-100,000 |
Interest rate |
9.15% |
Period (NPER) |
18.38 |
Therefore it will take approximate 18.38 years for the investment to grow.
Working
2)
Annual investment (PMT) = $5,000
Period (NPER) = 35 years
Future value (FV) = $1,000,000
To compute annual rate of return we can use RATE function in excel:
FV |
1,000,000 |
PMT |
-5,000 |
Period |
35 |
Annual rate |
8.67% |
Therefore annual rate of return will be 8.67%
Working
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