Answer:
3.82 years
Explanation:
FV of annuity = P[(1+r)^n - 1 / r]
Where FV = $20,500,000; P = $1,200,000; r = 6.25%/4 = 1.5625% quarterly
20,500,000 = 1,200,000 * [1+0.015625)^n - 1/0.015625]
20,500,000 / 1,200,000 = [1+0.015625)^n - 1/0.015625]
17.0833 = [(1+0.015625)^n - 1 / 0.015625]
17.0833 * 0.015625 = (1+0.015625)^n - 1
0.266927 = (1+0.015625)^n - 1
1.266927 = (1 + 0.015625)^n
Taking log of both sides of equation
LN(1.266927) = n*LN(1.015625)
n = LN(1.266927)/LN(1.015625)
n = 0.236594/0.015504
n = 15.26 quarters
No of years = 15.26/4
No of years = 3.82 years
