Question

Anthony Finley wishes to become a millionaire. His money market fund has a balance of $287,270 and has a guaranteed interest rate of 10%. How many years must Anthony leave that balance in the fund in order to get his desired $1,200,000

Answer 1

15 years

Step-by-step explanation:

The target accumulated future amount is the future value of the initial investment(present value), hence, using the future value formula provided below we can determine the investment time horizon in years required to accumulate the target amount:

FV=PV*(1+r)^n

FV=$1,200,000

PV=$287,270

r=10%

n=investment period in years=unknown

$1,200,000=$287,270*(1+10%)^n

$1,200,000/$287,270=(1+10%)^n

$1,200,000/$287,270=(1.10)^n

take log of both sides

ln($1,200,000/$287,270)=n ln(1.10)

n=ln($1,200,000/$287,270)/ln(1.10)

n=15.00years