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I need some help with this

I need some help with this-example-1
User Rudy Velthuis
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1 Answer

14 votes
14 votes

Answer:

5.09 years

Explanation:

The formula for the future value of an investment can be filled with the given values and solved for time.

Formula

The future value of a one-time investment P earning interest at annual rate r compounded n times per year for t years is ...

FV = P(1 +r/n)^(nt)

Application

Using this formula with the given values, we have an expression for t:

7300 = 5000(1 +0.075/4)^(4t)

Dividing by 5000, we have ...

1.46 = 1.01875^(4t)

Taking logarithms gives the linear equation ...

log(1.46) = 4t·log(1.01875)

Dividing by the coefficient of t, we find ...

t = log(1.46)/(4·log(1.01875)) ≈ 5.0929

The time required for the value to reach $7300 is about 5.09 years.

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Additional comment

The attachments show different calculator solutions. They give the same value for t.

The TVM Solver uses P/Y = 1 so the value of N is in years.

The graphical solution recasts the problem to f(x) = 0. It finds the value of t that makes the difference between the investment value and $7300 be zero.

I need some help with this-example-1
I need some help with this-example-2
User Hutch
by
2.9k points