Question

You expect to receive $5,000 at graduation one year from now. your plan is to investthis money at 6.5 percent, compounded annually, until you have $50,000. at that time,you plan to travel around the world. how long from now will it be until you can beginyour travels?

Answer 1

After one year, the amount will be (1.065)($5000) After two years, the amount will be (1.065)(1.065)($5000) This equals (1.065)^2 ($5000) After n years, the amount will be (1.065)^n ($5000) (1.065)^n ($5000) = $50,000 (1.065)^n = 10 (n) (ln(1.065)) = ln(10) n = ln(10) / ln(1.065) n = 37 You can begin your travels in about 37 years.