Reference no: EM132355791
1. Leslie? Mosallam, who recently sold her? Porsche, placed ?$10 comma 000 in a savings account paying annual compound interest of 5 percent.
a. Calculate the amount of money that will accumulate if Leslie leaves the money in the bank for 3?, 7?, and 17 ?year(s).
b. Suppose Leslie moves her money into an account that pays 7 percent or one that pays 9 percent. Rework part ?(a?) using 7 percent and 9 percent.
c. What conclusions can you draw about the relationship between interest? rates, time, and future sums from the calculations you just? did?
2. You are hoping to buy a house in the future and recently received an inheritance of ?$22 comma 000. You intend to use your inheritance as a down payment on your house.
a. If you put your inheritance in an account that earns 9 percent interest compounded? annually, how many years will it be before your inheritance grows to ?$32 comma 000??
b. If you let your money grow for 10.5 years at 9 percent?, how much will you? have?
c. How long will it take your money to grow to ?$32 comma 000 if you move it into an account that pays 3 percent compounded? annually? How long will it take your money to grow to ?$32 comma 000 if you move it into an account that pays 11 percent??
d. What does all this tell you about the relationship among interest? rates, time, and future? sums?
3. You just received a bonus of ?$3000.
a. Calculate the future value of ?$3000?, given that it will be held in the bank for 6 years and earn an annual interest rate of 6 percent
b. Recalculate part ?(a?) using a compounding period that is? (1) semiannual and? (2) bimonthly.
c. Recalculate parts ?(a?) and ?(b?) using an annual interest rate of 12 percent.
d. Recalculate part ?(a?) using a time horizon of 12 years at an annual interest rate of 6 percent. e. What conclusions can you draw when you compare the answers in parts ?(c?) and ?(d?) with the answers in parts ?(a?) and ?(b?)?
4. If you deposit ?$3 comma 100 today into an account earning an annual rate of return of 6 ?percent, what would your account be worth in 35 years? (assuming no further? deposits)? In 40 ?years?
5. Sarah Wiggum would like to make a single investment and have ?$1.6 million at the time of her retirement in 26 years. She has found a mutual fund that will earn 5 percent annually. How much will Sarah have to invest? today? If Sarah earned an annual return of 17 ?percent, how soon could she then? retire?
a. If Sarah can earn 5 percent annually for the next 26 years, the amount of money she will have to invest today is ?