You have $42,912.42 in a brokerage account, and you plan to deposit an additional $7,500 at the end of every future year until your account totals $375,000. You expect to earn 7.5% annually on the account. How many years will it take to reach your goal? Round your answer to the nearest whole number.
We use the formula:
A=P(1+r/100)^n
where
A=future value
P=present value
r=rate of interest
n=time period.
Hence future value of $42,912.42 =$42,912.42 *(1.075)^n
Future value of annuity=Annuity[(1+rate)^time period-1]/rate
=$7500[(1.075)^n-1]/0.075
Hence
375000=$42,912.42 *(1.075)^n+$7500[(1.075)^n-1]/0.075
375000=$42,912.42 *(1.075)^n+$100,000[(1.075)^n-1]
375000=$42,912.42 *(1.075)^n+$100,000*(1.075)^n-100,000
(375000+100,000)=(1.075)^n[42,912.42+100,000]
(375000+100,000)/[42,912.42+100,000]=(1.075)^n
(1.075)^n=3.323713922
Taking log on both sides;
n*log 1.075=log 3.323713922
n=log 3.323713922/log 1.075
=17 years(Approx).
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