Question

Megan Brink is offered the possibility of investing $6,651 today at 6% interest per year in a desire to accumulate $10,000.

Answer 1

Answer:

7 years.

Explanation:

We know,

Future value = Present Value × $(1 + i)^{n}$

Given,

Future Value, FV = $10,000

Present Value, PV = $6,651

Interest rate, i = 6% = 0.06

We have to determine how many years to acquire $10,000 in the future.

Now, $10,000 = $6,651 × $(1 + 0.06)^{n}$

or, $(10,000 ÷ 6,651) = $1.06^{n}$

or, 1.5035 = $1.06^{n}$

or, Log 1.5035 = n log 1.06

Using the calculator to find the value of log.

0.1771 = n × 0.0253

or, n = 0.1771 ÷ 0.0253

or, n = 7 years

7 years will be needed to acquire $10,000 in the future.