Question

1. Number of years to provide a given return   In the information given in following​ case,

determine the number of years that the given ordinary annuity cash flows must continue in order to provide the rate of return on the initial amount.

Initial amount	Annual cash flow	Rate of return
​$33,200	​$10,321	16​%

The number of investment​ years,

n​, is years????  ​(Round to two decimal​ places.)

2. Number of years to equal future amount   For the following​ case, determine the number of years it will take for the initial deposit to grow to equal the future amount at the given interest rate

Initial deposit	Future amount	Interest rate
​$7,589	​$22,200	13​%

The number of years for this investment, n, is how many years??? ( round to two decimal places)

Answer 1

1.Information provided:

Present value= $33,200

Yearly cash flow= $10,321

Rate of return= 16%

The number of years to produce the required rate of return is calculated with the help of a financial calculator.

Enter the below in a financial calculator:

PV= -33,200

PMT= 10,321

I/Y= 16

Enter the CPT key and N to calculate the number of years to produce the required rate of return.

The value obtained is 4.87 years.

Therefore, it takes 4.87 years to produce the required rate of return.

2.Information provided:

Present value= $7,589

Future value= $22,200

Interest rate= 13%

The time taken for the investment is calculated with the help of a financial calculator.

Enter the below in a financial calculator:

PV= 7,589

FV= 22,200

I/Y= 13

Press the CPT key and N to calculate the time taken for the investment.

The value obtained is 8.78 years,

Therefore, the investment takes 8.78 years.