In: Finance
Your grandparents have promised you $39,000 as a graduation gift in two years. If the rate of return on investing the gift is 10 percent, and you would ideally like to have $174,000 as an ending balance. How long will you wait from now? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Future Value required (FV) = $174,000
Value after 2 years when gift is recevied (PV) = $39000
Interest rate (i) = 10%
Number of years required for $39000 to become $174000 at 10% rate (n) = ?
FV = PV x (1+i)n
174000 = 39000 x (1.10)n
4.461538 = 1.10n
Therefore n = 15.69 years
Therefore it will take 15.69 years for $39000 to become $174000.
I will receive $39000 after 2 years.
Therefore I have to wait 17.69 years for $174000