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aliina [53]
3 years ago
5

Some time ago, Julie purchased eleven acres of land costing $15,890. Today, that land is valued at $34,686. How long has she own

ed this land if the price of the land has been increasing at 5 percent per year?
Business
1 answer:
melamori03 [73]3 years ago
3 0

Answer:

Julie purchased the acres 16 year ago

Explanation:

Imagine you are Julie at year cero about to purchase eleven acres of land. The seller tells you that in X amount of years it will value $34686 because it increases 5% each year. He also tells you that according to the Present Value formula, the eleven acres are worth today $15890.

The formula is:

PV=Ct/[(1+r)^n]

Ct= cash flow at t time

r= rate

n= period of time

To calculate how many years it will be worth $34686 you need to isolate n from the PV formula

<u>n=[ln(Ct/PV)]/ln(1+r)</u>

<u />

n=ln(34686/15890)/ln(1+0,05)

n=16

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