Question

Problem 5-5 Calculating the Number of Periods [L04] Solve for the unknown number of years in each of the following (Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16)): Present Value Years Interest Rate Future Value $ 630 880 19,100 22,200 12 18 14 8% $ 1,496 2,496 392,101 403,794

Answer 1

We know the formula for computation of Present value Present value Future value/(1+r)r r is Rate of Interest n is No of vears For the first one 630-1496/(1+0.08)'n 1.08 n-(1496/630) 108 n-2.37460 Using trail and error or Present value factor table n is 11.235 years Years- 11.235 years approx. For the second one: 880 2496/(1+0.12)'n 1.12 n-(2496/880) 1.12 n- 2.8364 Using trail and error method n is computed as 9.2 years Years - 9.2 years approx. For the third one: 19100-392101/(1+0.18) n 1.18 n-(392101/19100) 1.18 n 20.52885 Using trail and error method n is computed as 18.257 vears Years -18.257 years approx. For the fourth one: 22200-403794/(1+0.14)An 1.14 n-(403794/22200) 1.14 n-18.18891896 Using trail and error method n is computed as 22.1385 years Years -22.1385 years approx.