You expect to receive $40,000 at graduation in two years. You plan on investing it at 9 percent until you have $175,000. How long will you wait from now?

Question

Lutz

Business

5 October, 01:23

You expect to receive $40,000 at graduation in two years. You plan on investing it at 9 percent until you have $175,000. How long will you wait from now?

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Answers (1)

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Jaslene Cooley · Answer 1

19.13 years

Explanation:

Use following formula to calculate the time required

Future Value = Present value x (1 + rate of return) ^number of years

FV = PV (1 + r) ^n

$175,000 = $40,000 (1 + 0.09) ^n

$175,000 / $40,000 = (1 + 0.09) ^n

4.375 = (1.09) ^n

Log 4.375 = n log 1.09

n = Log 4.375 / log 1.09

n = 17.13 years

Time to wait from now = 17.13 + 2 = 19.13 years