This preview has intentionally blurred sections. Sign up to view the full version.View Full Document
Unformatted text preview: 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) t = ln($75,000 / $10,000) / ln(1.11) = 19.31 So, the money must be invested for 19.31 years. However, you will not receive the money for Another two years. From now, you’ll wait: 2 years + 19.31 years = 21.31 years 3. You're trying to save to buy a new $170,000 Ferrari. If you believe that your mutual fund will achieve a 12% per year rate of return, and you want to buy the car for your birthday in 9 years, how much must you invest today? (Question #17 from page 142) To find the PV of a lump sum, we use: PV = FV / (1 + r)t PV = $170,000 / (1.12)9 = $61,303.70...
View Full Document
- Spring '11