Asked by Anonymous
The Bruce’s purchased $2500 worth of
GIC’s. How long, t, will it take for the
investment to increase to $3500, if the
interest rate is 2.75%.
What is the Fv and Pv
GIC’s. How long, t, will it take for the
investment to increase to $3500, if the
interest rate is 2.75%.
What is the Fv and Pv
Answers
Answered by
MathMate
Direct substitution of equation:
Pv=present value
Fv=future value
Fv=Pv*(1+i)<sup>n</sup>
where
i=interest rate per compounding period (assumed year here)
n=number of compounding periods (assumed year here).
note that 2.75% is equivalent to 0.0275 for i (interest rate).
If both Pv and Fv are given then you can rearrange
Fv/Pv = (1+i)^n
Take log on both sides,
(and recall that log(a^n)=n log(a) )
then
log(Fv/Pv) = n log(1+i)
from which n can be solved.
Pv=present value
Fv=future value
Fv=Pv*(1+i)<sup>n</sup>
where
i=interest rate per compounding period (assumed year here)
n=number of compounding periods (assumed year here).
note that 2.75% is equivalent to 0.0275 for i (interest rate).
If both Pv and Fv are given then you can rearrange
Fv/Pv = (1+i)^n
Take log on both sides,
(and recall that log(a^n)=n log(a) )
then
log(Fv/Pv) = n log(1+i)
from which n can be solved.
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