Edward wishes to save enough money to purchase a retirement lake cabin. He is willing to spend $500,000 for the cabin and he can save $25,000 per year and invest the money into an account earning 8.00% per year
If Edward's investments come in the form of equal annual end-of-the-year cash flows and the first cash flow is in exactly one year, how long will it take him to save enough money to buy the lake cabin?
A) Between 8 and 9 years
B) Between 10 and 11 years
C) Between 12 and 13 years
D) Exactly 20 years
Answer: C
Explanation: C) n = ln /ln(1 + r) = ln /ln(1.08) = 12.42 years.
MODE = END
INPUT ? 8 0 25,000 -500,000
KEY N I/Y PV PMT FV
CPT 12.42
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