Personal Finance: Turning Money into Wealth (7th Edition) (Prentice Hall Series in Finance)
Personal Finance: Turning Money into Wealth (7th Edition) (Prentice Hall Series in Finance)
7th Edition
ISBN: 9780133856439
Author: Arthur J. Keown
Publisher: PEARSON
Question
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Chapter 3, Problem 1PA
Summary Introduction

To calculate:

The number of years to earn one million on investing $250,000 in diversified equity portfolio returning 8 percent per year.

Introduction:

The diversified equity portfolio can be referred to the collection of number of equity shares from different companies. The portfolio is made up of different equity shares which provides different rate of return to reduce the risk and maximize the return from investment.

Expert Solution & Answer
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Answer to Problem 1PA

Solution:

The number of years to earn $1,000,000 by investing $250,000 in diversified equity portfolio returning 8% is 18.012 years.

Explanation of Solution

Given,

Investment in the diversified equity portfolio is $250,000.

Return on investment is 8%.

Required return from investment is $1,000,000.

The calculation of number of years on spreadsheet is,

Particulars Amount ($)
Future Value 1,000,000
Present Value 250,000
Rate of Interest (%) 0.08
Number of Years 18.01293668

Table (1)

The number of years is 18.012 years.

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