Question

Tom Thompson expects to invest $19,000 at 7% and, at the end of a certain period, receive $52,421. How many years will it be before Thompson receives the payment? (PV of $1, FV of $1, PVA of $1, and FVA of $1).

Answer 1

15 years

Step-by-step explanation:

Use the FV formula to calculate the total duration;

Future value ; FV= 52,421

Present value; PV = 19,000

Interest rate ; r = 7% of 0.07 as a decimal

Total duration ; t = ?

`FV = PV(1+r)^(t)\\ \\ 52,421 = 19,000(1.07)^(t)`

Divide both sides by 19,000;

`52,421/19,000 = 1.07^(t) \\ \\ =2.759 =1.07^(t)`

Introduce logarithm on both sides;

㏑2.759 = t㏑1.07

Divide both sides by ㏑1.07 to solve for t;

㏑2.759 / ㏑1.07 = t

t = 14.9998

Therefore, it will take 15 years