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CHAPTER 5-1

# CHAPTER 5-1 - FV = \$364,518 = \$18,400(1.17)t t =...

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FV = \$364,518 = \$18,400(1.17) t ; t = ln(\$364,518 / \$18,400) / ln 1.17 = 19.02 years FV = \$173,439 = \$21,500(1.15) t ; t = ln(\$173,439 / \$21,500) / ln 1.15 = 14.94 years 6. 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 Solving for r , we get: r = (FV / PV) 1 / t – 1 r = (\$290,000 / \$55,000) 1/18 – 1 = .0968 or 9.68% 7. To find the length of time for money to double, triple, etc., the present value and future value are irrelevant as long as the future value is twice the present value for doubling, three times as large for tripling, etc. 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 Solving for t , we get: t = ln(FV / PV) / ln(1 + r ) The length of time to double your money is: FV = \$2 = \$1(1.07)

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CHAPTER 5-1 - FV = \$364,518 = \$18,400(1.17)t t =...

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