Question

1 year(s) ago, Fatima invested 5,980 dollars. In 1 year(s) from today, she expects to have 8,640 dollars. If Fatima expects to earn the same annual return after 1 year(s) from today as the annual rate implied from the past and expected values given in the problem, then in how many years from today does she expect to have exactly 11,470 dollars? Round your answer to 2 decimal places (for example, 2.89, 14.70, or 6.00).

Answer 1

Rate of return in one year = [Future value / Present value ]^1/n - 1

           = [8640 / 5980 ]^1/1   - 1

           = 1.4448 - 1

           = .4448 or 44.48%

Number of years from today = IN [Future value /present value ]/ IN [1+r]

         = IN [11470/ 5980 ]/ IN [1+.4448]

         = IN [1.91806]/IN [1.4448]

         = .65131/ .36797

        = 1.77 Years