Answer:
37 years
Explanation:
We know,
Future value = Present value (1 + r)^n
Given,
Future value, FV = $230,000;
Present value, PV = $32,000;
Interest rate, r = 5.5% = 0.055;
We have to determine how many years later I can purchase the Ferrari.
Now, putting the values into the formula, we get,
FV = PV × (1 + r)^n
or, $230,000 = $32,000 × (1 + 0.055)^n
or, $230,000 ÷ $32,000 = (1 + 0.055)^n
or, 7.1875 = (1 + 0.055)^n
or, log 7.1875 = n × log 1.055
or, n × log 1.055 = log 7.1875 [Changing the side]
or, n = log 7.1875 ÷ log 1.055
Using financial calculator/Scientific Calculator,
or, n = 0.8566 ÷ 0.0233
Therefore, n = 36.76 or almost 37 years.
