f for the next 30 years you place $2,000 in equal year-end-deposits into an acco
ID: 2811209 • Letter: F
Question
f for the next 30 years you place $2,000 in equal year-end-deposits into an account earning 5% per year, how much money will be in the account at the end of that time period?
Sundial Resorts' new chief Marketing officer has pledged to increase sales form its current level os 1.25 million at a rate of 5% per year until the firm hits sales of 2.75 million. How long will it take to hit the target goal at this rate of increase? A. a little less than 16 years B. a little more than 16 years C. between 14 and 15 years D. between 11 and 12 years
Explanation / Answer
1.Future value of annuity=Annuity[(1+rate)^time period-1]/rate
=$2000[(1.05)^30-1]/0.05
=$2000*66.4388475
=$132,877.70(Apporx).
2.
We use the formula:
A=P(1+r/100)^n
where
A=future value
P=present value
r=rate of interest
n=time period.
2.75=1.25*(1.05)^n
(2.75/1.25)=(1.05)^n
2.2=(1.05)^n
Taking log on both sides;
log 2.2=n*log 1.05
n=log 2.2/log 1.05
which is equal to
=16.16 years(Approx)
Hence the correct option is B.
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