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Tom Thompson expects to invest $19,000 at 7% and, at the end of a certain period, receive $52,421. How many years will it be before Thompson receives the payment? (PV of $1, FV of $1, PVA of $1, and FVA of $1).

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beritop1089

Answer:

15 years

Explanation:

Use the FV formula to calculate the total duration;

Future value ; FV= 52,421

Present value; PV = 19,000

Interest rate ; r = 7% of 0.07 as a decimal

Total duration ; t = ?

[tex]FV = PV(1+r)^{t}\\ \\ 52,421 = 19,000(1.07)^{t}[/tex]

Divide both sides by 19,000;

[tex]52,421/19,000 = 1.07^{t} \\ \\ =2.759 =1.07^{t}[/tex]

Introduce logarithm on both sides;

㏑2.759 = t㏑1.07

Divide both sides by ㏑1.07 to solve for t;

㏑2.759 / ㏑1.07 = t

t = 14.9998

Therefore, it will take 15 years

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