Provide Comments to the response to 4-3 Problem below: 4-3. (Problem 4-8) Your g

Question

Provide Comments to the response to 4-3 Problem below:

4-3. (Problem 4-8) Your grandfather put some money in anaccount for you on the day you were born. You are now 18 years oldand are allowed to withdraw the money for the first time. Theaccount currently has $3996 in it and pays an 8% interest rate.

a.   How much money would be in the account ifyou left the money there until your 25th birthday?

b.   What if you left the money until your 65thbirthday?

c.   How much money did your grandfatheroriginally put in the account?

Response:

a.       $3996 x (1.08)^7 = $3996x 1.7128 = $6,848.44

b.      $3996 x (1.08)^47 = $3996 x37.2320 = $148,779.12

c.       Original money = $3996 /(1.08)^18 = $3996 / 3.996 = $1000

Explanation / Answer

a is correct, you can also solve this by first finding what grandpaorginally deposited. You can do this by doing PV equation withfv=3996, pmt=0, i=8% and n=18. This gives you 1,000. You can thendo a FV with PV=1000, i=8%, n=25, pmt = 0 and get 6848.44. same thing but now make n = 65, and your answer is correctagain. well, c is right also as i solved that orginally. good word, and keep asking questions.

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