Example 6-4) How long does it take for the following to happen? a. $1,000 grows

Question

Example 6-4) How long does it take for the following to happen? a. $1,000 grows into $1,685.06 at 11%. ____________________________________________________________________________________________________________________________________________________________ b. $500 grows into $1,021.74 at 18% compounded monthly, ____________________________________________________________________________________________________________________________________________________________ c. $5,000 grows into $9,030.56 at 12% compounded quarterly.

Explanation / Answer

Solution:

1 Future Value = Present value * FVIF Present value 1,000 Future value 1,685.06 Future value / Present value 1.68506 At 5 years, FVIF is 1.68506 @ 11% Thus, it will take 5 years to grow $ 1,685. 05 from 1,000 2 Future Value = Present value * FVIF Present value 500 Future value 1,021.74 Future value / Present value 2.04348 Rate of interest - 18% / 12 1.50% At 4 years, FVIF is 2.04348 @ 1.5% Thus, it will take 4 years to grow $ 1,024.74 from 500 3 Future Value = Present value * FVIF Present value 5,000 Future value 9,030.56 Future value / Present value 1.806112 Rate of interest - 12% / 4 3.00% It will take 20 periods, - 20 / 4 years 5 At 5 years, FVIF is 1.806112 @ 3 % Thus, it will take years to grow $ 9,030.56 from 5,000

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