Answer:
number of periods = 8 years.
Explanation:
We know,
Future Value = Present value × [tex](1 + r)^{n}[/tex]
Here,
Present value = PV = $2,500
Future value = FV = $3,500
Interest rate (Compounding) = 5% = 0.05
We have to determine how many years (Periods) it will take, n = ?
Putting the values into the above formula,
$3,500 = $2,500 × [tex](1 + 0.05)^{n}[/tex]
or, [tex](1 + 0.05)^{n}[/tex] = $3,500 ÷ $2,500
or, n log 1.05 = 1.4
or, n × 0.17609 = 1.4
or, n = 1.4 ÷ 0.17609
Therefore, number of years = 7.95 or 8 years.
