You expect to receive 11000 at graduation in two years You p

You expect to receive $11,000 at graduation in two years. You plan on investing it at 11 percent until you have $106,000. How long will you wait from now? (Do not round your intermediate calculations.)

rev: 09_17_2012

23.71 years

19.71 years

21.71 years

26.55 years

26.08 years

Solution

We use the formula:
A=P(1+r/100)^n
where
A=future value
P=present value
r=rate of interest
n=time period

106000=11000(1+11/100)^n

(106000/11000)=(1.11)^n

Taking log on both sides

log (106000/11000)=n*log 1.11

n=log(106000/11000)/log 1.11

=21.71 years

Hence time to wait from today=(21.71+2)

=23.71 years(Approx).