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12 April, 09:08

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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  1. 12 April, 12:57
    0
    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
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