You expect to receive $34,000 at graduation in two years. You plan on investing it at 10 percent until you have $169,000.

You expect to receive $34,000 at graduation in two years. You plan on investing it at 10 percent until you have $169,000.

 

How long will you wait from now? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.)

 

Period

years

 

Explanation:

The time line is:

0	2		t
	−$34,000		$169,000

To answer this question, we can use either the FV or the PV formula. Both will give the same answer since they are the inverse of each other. We will use the FV formula, that is:

FV = PV(1 + r)t

$169,000 = $34,000(1.1000)t

t = ln($169,000 / $34,000) / ln 1.1000

t = 16.82 years

From now, you’ll wait 2 + 16.82 = 18.82 years

 

Calculator Solution:

Note: Intermediate answers are shown below as rounded, but the full answer was used to complete the calculation.

Enter

10%

±$34,000

$169,000

N

I/Y

PV

PMT

FV

Solve for

16.82

You must wait 2 + 16.82 = 18.82 years.