You are hoping to buy a house in the future and recently recieved an inheritance

Question

You are hoping to buy a house in the future and recently recieved an inheritance of $22,000. 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 you inheritance grows to $33,000.

b. If you let your money grow for 9.5 years at 9 percent, how much will you have?

c. How long wil it take your money to grow to $33,000 if you move it to an account that pays 4 percent compounded annually? How long will it take your money to grow to $33,000 if you move it to an account that pays 11 percent?

d. What does this tell you about the relationship among interest rates, time, and future sums?

Explanation / Answer

a . annual compunnded inrerate rate @9% 1st year 1980 2nd year 2159 3 rd year 2353 4th year 25645th year 2795 add it after 5 year it grow to 33000 or more.

b. 6th year 3046 7th year 3321 8th year 3620 9th year 3945 9.5 year 2150 add interest +principal 22000 i.e 22000+27934=49934

c. @ 4% compunded anuaully it will take 12 years to make it 11000. (i.e 22000+11000). @ 11 %anuaully it will take 4 years to grow upto 11000.

d. as the time and interest rate grows . money grow in sync with time and intrest increases it has positive relationship with rising int. rate rate and time .

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