You're trying to save to buy a new $191,000 Ferrari. You have $41,000 today that can be invested at your bank. The bank pays 4.9 percent annual interest on its accounts. How long will it be before you have enough to buy the car?

You're trying to save to buy a new $191,000 Ferrari. You have $41,000 today that can be invested at your bank. The bank pays 4.9 percent annual interest on its accounts.

 

How long will it be before you have enough to buy the car? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

 

Number of years

Explanation:

We can use either the FV or the PV formula. Both will give the same answer since they are the inverse of each other. We will use the FV formula, that is:

FV = PV(1 + r)t

Solving for t, we get:

t = ln(FV / PV) / ln(1 + r)

t = ln($191,000 / $41,000) / ln(1.049) = 32.17 years

Calculator Solution:

Note: Intermediate answers are shown below as rounded, but the full answer was used to complete the calculation.

Enter

4.9%

$41,000

±$191,000

N

I/Y

PV

PMT

FV

Solve for

32.17