1-Your mother just inherited $500,000. If she invests the money in a well-diversified, low-cost mutual fund returning 8% per year, how many years will it take her investment to become worth $1,000,000?
2- You just graduated from college and landed your first "real" job, which pays $70,000 a year. In 19 years how much will you need to earn to maintain the same purchasing power if inflation is 3.00% per year?
Present value = Future value/(1+i)^n
i = interest rate per period
n= number of periods
1)
500000 = 1000000/(1+8%)^n
=>
n = ln(1000000/500000)/ln(1.08)
= 9.01 years
= 9 years
2)
future value = 70000 * (1+3%)^19
= 122745.42
1-Your mother just inherited $500,000. If she invests the money in a well-diversified, low-cost mutual fund...
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