1. Fourteen years ago, your parents set aside $37,500 to help fund your college
ID: 2643514 • Letter: 1
Question
1. Fourteen years ago, your parents set aside $37,500 to help fund your college education. Today, that fund is valued at $71,332. What rate of interest is being earned on this account?
2. Some time ago, Vanessa purchased eleven acres of land costing $58,500. Today, that land is valued at $253,167. How long has she owned this land if the price of the land has been increasing at 9% per year?
3. On your ninth birthday, you received $500 which you invested at 4% interest, compounded annually. Your investment is now worth $1,185. How old are you today?
Explanation / Answer
Q1 Details Amt $ a Principal value 37,500.0 b Maturity value 71,332.0 c Future value interest factor =b/a= 1.9022 d No of Years 14 From FVIF table , the closest interest rate value of 1.9022 for 14 years is 4.7% Therefore interest rate earned is 4.7% Q2 Details Amt $ a Cost of Land earlier 58,500 b Cost of Land now 253,167 c Future value interest factor =b/a= 4.3276 d increase in value per year 9% From FVIF table , the closest value of years for 4.3276 interest rate 9% is is 17 years Q3 Details Amt $ a Principal value at 9 years age 500 b Maturity value 1,185 c Future value interest factor =b/a= 2.3700 d Interest rate 4% From FVIF table , the closest value of years for 2.3700 interest rate 4% is is 22 years So I am 31 years old now
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