Question

If an investment of $40,000 is earning an interest rate of 12.00%, compounded annually, then it will take 4.50 years for this investment to reach a value of $66,610.22 ________ assuming that no additional deposits or withdrawals are made during this time.

Answer 1

4.5 years

Explanation:

The computation of the number of years is shown below:-

Future value = Present value × (1 + interest rate)^n umber of years

$ 66,610.25 = $40,000 × (1 + 0.12)^n

$1.665256 = (1.12)^n

LN 1.665256 = n LN 1.12

0.509979 = n × 0.113329

n = 4.499

or

= 4.5 years

Therefore for computing the number of years we simply applied the above formula.