b) If James had funded this account at age 18, how much money would give same result as depositing $2500 at age 25? Round to nearest dollar.
James deposited 2,500 at the age of 25. Right?. How much would that money be worth at 18, or 7 years earlier? So, you find its Present Value at 18 using this formula:
PV=FV[1 + R]^-N, Where R=Interest rate per period, N=number of periods, PV=Present value, FV=Future value.
PV=2,500 [1 + .11]^ -7
PV=2,500 [1.11]^-7
PV=2,500 x 0.48165841
PV=1,204.15.Which is what we found yesterday. Right?.
Now, if you try using this as PV and 25,000 as FV and solve for n @ 11%, you should get n=29.06 years, which would make James: 18 + 29 =47 years old.