Relationship among interest rates-time and future sums

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Reference no: EM131905759

1. (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

2. (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?

3. (Present value) Anita Solomon would like to make a single investment and have $2 million at the time of her retirement in 35 years. She has found a mutual fund that will earn 4 percent annually. How much will Sarah have to invest today? What if Anita were a finance major and learned how to earn a 14 percent annual return? How soon could she then retire?

4. (Solving for n) How many years will the following take?

$500 to grow to $1,039.50 if it’s invested at 5 percent compounded annually

$35 to grow to $53.87 if it’s invested at 9 percent compounded annually

$100 to grow to $298.60 if it’s invested at 20 percent compounded annually

$53 to grow to $78.76 if it’s invested at 2 percent compounded annually

Reference no: EM131905759

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