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Cut Conditional Format as Cell Insert Delete Format Formatting Table Styles Font Styles Cells 2.29 Interest Rates: Your parents have given you $1,000 a year before your graduation so that you can take a trip when you graduate. You wisely decide to invest the money in a bank CD that pays 6.75 percent interest. You know the trip costs $1,025 right now and that inflation for the year is predicted to be 4 percent. Will you have enough money in a year to purchase the trip? 15 18 O Type here to search

Explanation / Answer

Step 1:

Interest = PNR/100 = 1000 X 1 X 6.75/100 = 67.50

Thus, amount after 1 year = 1000 + 67.5 = 1067.50

Step 2:

Trip cost = 1025

Inflation = 1025 X 4/100 = 41

Thus, Trip cost = 1025 + 41 = 1066

Conclusion:

Since the amount = 1067.50 > Trip cost = 1066, you will have enougn money in a year to purchase the ticket.

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