Question

if you invest $1500 at the beginning of each year into an account which averages a return of 12%, approximately how long will it take to accumulate $50,000 in the account?

Answer 1

Here we need to find the time to growth $1500 invested each year to $50000 at 12% rate.

We will use The Future Value formula of Excel (The logic and values can be used in Financial Calculators as well)

Here,

Rate = 12%

PMT = Annual Investments = - $1500 (This is a cash outflow, hence we use the negative sign here, cash inflows are positive sign)

PV = Current Value of Investments =0

FV = Future value of investments = $50,000

Type = 1 (payment at the beginning of period)

Inputting these values in excel formula for FV, we get,

Hence FV = FV(Rate,PMT,PV,FV,Type) = FV(12%,-1500,0,50000,1) = 13.41 years

The investment of $1500 per year will grow to $50000 in 13.41 years.