   Chapter 5, Problem 5P Fundamentals of Financial Manageme...

14th Edition
Eugene F. Brigham + 1 other
ISBN: 9781285867977

Solutions

Chapter
Section Fundamentals of Financial Manageme...

14th Edition
Eugene F. Brigham + 1 other
ISBN: 9781285867977
Textbook Problem

TIME TO REACH A FINANCIAL GOAL You have $42,180.53 in a brokerage account, and you plan to deposit an additional$5,000 at the end of every future year until your account totals $250,000. You expect to earn 12% annually on the account. How many years will it take to reach your goal? Summary Introduction To determine: The time required to reach the financial goal. Future value: Future value is the amount of a current asset at a certain point of time in the future, which has been accumulated at an assumed rate of growth. Explanation Given information: Present value (PV) is$42,180.53.

Rate of interest (r) is 12%.

Future value (FV) is 250,000.

Payment (Pmt) amount made at the end of the every year is \$5,000.

Required formula:

FV=Pmt((1+r)n1)r+PV(1+r)n

Here, n is the time

Calculation:

Substitute the respective values in the formula.

250,000=5,000((1+0.12)n1)0

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