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Buy a house in the future and recently

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(Future value) To what amount will the following investments accumulate?

  • $5,000 invested for 10 years at 10 percent compounded annually
  • $8,000 invested for 7 years at 8 percent compounded annually
  • $775 invested for 12 years at 12 percent compounded annually
  • $21,000 invested for 5 years at 5 percent compounded annually

(Future value) You are hoping to buy a house in the future and recently received an inheritance of $20,000. You intend to use your inheritance as a down payment on your house.

  • If you put your inheritance in an account that earns a 7 percent interest rate compounded annually, how many years will it be before your inheritance grows to $30,000?
  • If you let your money grow for 10.25 years at 7 percent, how much will you have?
  • How long will it take your money to grow to $30,000 if you move it into an account that pays 3 percent compounded annually? How long will it take your money to grow to $30,000 if you move it into an account that pays 11 percent?
  • What does all of this tell you about the relationship among interest rates, time, and future sums?

Reference no: EM131697135

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