Future Value of an Investment
The formula to calculate the future value (FV) of an investment P for t years at a rate r is:
Where m is the number of compounding periods per year.
Leyla needs FV = $7000 for a future project. She can invest P = $5000 now at an annual rate of r = 10.5% = 0.105 compunded monthly. This means m = 12.
It's required to find the time required for her to have enough money for her project.
Substituting:
Dividing by 5000:
Taking natural logarithms:
It will take 3.22 years for Leila to have $7000