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A travel operator announces that it can take anybody on a world tour at a price of OMR 200000
A travel operator announces that it can take anybody on a world tour at a price of OMR 200000. Suppose that you wish to avail this offer and you can save OMR 25000 annually. How much time you would require availing this offer, considering that your savings are accumulated at the rate of 10% annually?
Expert Solution
| This can be solved using the Future value of annuity formula |
| Future value of annuity is = P*((1+r)^n-1)/r |
| "P" is Annual payment = OMR 25,000/. |
| "r" is Annual interest rate = 10% |
| "n" is No of years = ? |
| Future value of annuity is = OMR 200,000/. |
| 200000=25000*((1+0.10)^n-1)/0.10 |
| ((1+0.10)^n-1)/0.10=10 |
| ((1+0.10)^n-1)=10*0.1 |
| ((1+0.10)^n-1)=1.00 |
| (1+0.10)^n=2.00 |
| 1.1^n=2 |
| Using trial and error method n is = 7.25 Years |
| Answer is 7.25 years it takes to accumulate |
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