Question

If you have $2,500 to invest and need to withdraw $4,430 at some time in the future, what is the minimum number of whole years to leave the money invested at 5 percent?

Answer 1

Answer:

Explanation:

Principal = P, Annual Rate = R%  and Time = T years

Simple Interest (SI)=P*R*T/100;

So, T = 100*SI/P*R

= 100 x (4430 - 2500) / 2500 * 5

= 100 x 1930 / 12500

= 16 years

Answer 2

The minimum number of years to leave the money invested at 5% is 12 years.

Given Information

PV = $2,500

FV = $4,430

Rate = 5%

n = ?

• The formula or Future Value = PV *(1+r)^n will be used  

$4,430 = $2,500 ((1+0.05)^n

$4,430 / $2,500 = ((1+0.05)^n

1.772 = (1.05)^n

Taking log both sides

log (1.772) = nlog (1.05)

n = log(1.772) / log (1.05)

n = 0.2485 / 0.02119

n = 11.727 years

n = 12

Therefore, the minimum number of years to leave the money invested at 5% is 12 years.

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