Suzy Douglas has been offered the opportunity of investing $73,540 now.The investment will earn 8% per year and at the end of its life will return $200,000 to Suzy.How many years must Suzy wait to receive the $200,000?

Question

Quizplus · Accepted Answer

The calculation is based on the formula for the future value of a single sum, which is FV = PV(1 + i)^n, where FV is the future value, PV is the present value, i is the interest rate per period, and n is the number of periods. Rearranging the formula to solve for n gives n = log(FV/PV) / log(1+i). Plugging in the values from the question gives n = log(200,000/73,540) / log(1.08) ≈ 13.

Suzy Douglas Has Been Offered the Opportunity of Investing $73,540