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You expect to receive $5,500 at graduation in three years. You plan on investing it at...

You expect to receive $5,500 at graduation in three years. You plan on investing it at 12% until you have $66,000.

How long will you wait from now? (Do not round intermediate calculations and round your final answer to 2 decimal places.)

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Answer #1

The number of years is computed as shown below:

Future value = Present value x (1 + r)n

$ 66,000 = $ 5,500 x (1 + 0.12)n

($ 66,000 / $ 5,500) = 1.12 n

12 = 1.12 n

Taking log both sides, we get:

log 12 = n log 1.12

2.48490665 = n x 0.113328685

n =  2.48490665 / 0.113328685

n = 21.92654622 years

So, the number of years to wait will be as follows:

= 21.92654622 + 3

= 24.93 years Approximately

Feel free to ask in case of any query relating to this question      

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