Time to Reach an Investment Goal The formula t = ln A − ln P r can be used to find the number of years t required for an investment P to grow to a value A when compounded continuously at an annual rate r . (a) How long will it take to increase an initial investment of $ 1000 to $ 4500 at an annual rate of 5.75 % ? (b) What annual rate is required to increase the value of a $ 2000 IRA to $ 30 , 000 in 35 years? (c) Give a derivation of this formula.
Time to Reach an Investment Goal The formula t = ln A − ln P r can be used to find the number of years t required for an investment P to grow to a value A when compounded continuously at an annual rate r . (a) How long will it take to increase an initial investment of $ 1000 to $ 4500 at an annual rate of 5.75 % ? (b) What annual rate is required to increase the value of a $ 2000 IRA to $ 30 , 000 in 35 years? (c) Give a derivation of this formula.
Solution Summary: The author explains how the formula t = ln A Ln P r can be used to find the number of years required for an investment p to grow to a value A when compounded continuously at
Time to Reach an Investment Goal
The formula
can be used to find the number of years
required for an investment
to grow to a value
when compounded continuously at an annual rate
.
(a) How long will it take to increase an initial investment of
to
at an annual rate of
?
(b) What annual rate is required to increase the value of a
IRA to
in 35 years?
(c) Give a derivation of this formula.
Expert Solution
To determine
To find: The formula can be used to find the number of years required for an investment to grow to a value
when compounded continuously at an annual rate .
b. What annual rate is required to increase the value of a IRA to in 35 years?
Answer to Problem 68AYU
Solution:
b.
Explanation of Solution
Given:
The formula can be used to find the number of years required for an investment to grow to a value
when compounded continuously at an annual rate .
Calculation:
b. What annual rate is required to increase the value of a IRA to in 35 years
Expert Solution
To determine
To find: The formula can be used to find the number of years required for an investment to grow to a value
when compounded continuously at an annual rate .
c. Give a derivation of this formula.
Answer to Problem 68AYU
Solution:
c. We know that
Taking ln on both sides we get
Therefore
Explanation of Solution
Given:
The formula can be used to find the number of years required for an investment to grow to a value
when compounded continuously at an annual rate .
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