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In: Finance

You have invested $100,000 in the US stock market via the S&P 500 Depository Receipts ETF...

You have invested $100,000 in the US stock market via the S&P 500 Depository Receipts ETF (SPY) which tracks the S&P 500 Index. You are going to pull out your money once your investment triples in value (i.e. becomes $300,000). Assume, that the S&P 500 Depository Receipts ETF (SPY) which you have invested in earns a 9% per annum rate of return. How many years is it expected to be until you are going to pull out your money?

Round your answer to two decimal places with no added punctuation or formatting

Solutions

Expert Solution

Future Value = Present Value * (1+r)^n

r = 0.09

300,000 = 100,000 * (1+0.09)^n

(1+0.09)^n = 300,000 / 100,000

(1+0.09)^n = 3

Taking log both sides

n * log 1.09 = Log 3

n * 0.03742649794 = 0.47712125472

n = 0.47712125472 / 0.03742649794

n = 12.75 years

You will pull out your money in 12.75 years.

jeff jeffy answered 2 years ago
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