(Future value) Leslie Mosallam, who recently sold her Porsche, placed $10,000 in
ID: 2674724 • Letter: #
Question
(Future value) Leslie Mosallam, who recently sold her Porsche, placed $10,000 in asavings account paying annual compound interest of 6%.
a. Calculate the amount of money that will accumulate if Leslie leaves the money in the
bank for 1, 5, and 15 years.
b. Suppose Leslie moves her money into an account that pays 8% or one that pays 10%.
Rework part (a) using 8% and 10%.
c. What conclusions can you draw about the relationship between interest rates, time,
and future sums from the calculations you just did?
Explanation / Answer
a)10,000(1.06)^1= 10,600 10,000(1.06)^5= 13,382.26 10,000(1.06)^15= 23,965.58 b) 8% 10,800, 14,693.28, 31,721,69 10% 11,000 16,105,10, 41,772,48 The higher interest rate you get and the longer you leave your money in, the higher your ending principal. (what a surprise).
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