7. You decide you want your child to be a millionaire.
You have a son today and every year
you deposit RM14,798 in an investment account that earns 9% per year. The money in
the account will be distributed to your son whenever the total reaches RM5,000,000. How
old will your son be when he gets the money (rounded to the nearest year)?
Annual Deposit (A) = $14,798
Future Value of Annuity ( FV) = $5,000,000
Rate of Return (r) = 9%
Time Required (n) = ?? ( We need to find )
= $5,000,000 = $14,798 * FVAF ( 9% , n )
= $5,000,000 = $14,798 * [ ( 1 + 0.09 )n - 1 ] / 0.09
= 337.8835 = [ ( 1 + 0.09 )n - 1 ] / 0.09
= [ ( 1 + 0.09 )n - 1 ] = 30.4095
( 1 + 0.09 )n = 31.4095
Take log Both Sides
n log ( 1.09 ) = log ( 31.4095 )
n = 40
Therefore the age of son is 40 Years when he gets money
If there is any doubt please ask in comments
Thank you please rate
Get Answers For Free
Most questions answered within 1 hours.