Your grandparents have promised you $39,000 as a graduation gift in two years. If the rate...

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.)

Solutions

Expert Solution

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

jeff jeffy answered 2 years ago

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