How many years will it take for 120,000 to grow to be 345,000 if it is invested in an account with an annual interest rate of 7%?
The amount of 120,000 (PV) is invested now at the start of period 1, and needs to be compounded forward at a discount rate of 8% (i) to the value of 345,000 (FV).
This problem is solved using the lump sum number of periods formula as follows.
FV = 345,000 PV = 120,000 i = 7% n = LN (FV / PV) / LN (1 + i) n = LN (345,000 / 120,000) / LN (1 + 7%) n = 15.61
The amount of 120,000 invested today in an account earning 7% compound interest, will grow into an amount of 345,000 in 15.61 years time.
NP1 Number of Periods Example
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