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

Question

You are hoping to buy a house in the future and recently received an inheritance of $22,000.00. You intend to use your inheritance as a down payment on you house.

a)     Ia) If you put your inheritance in an account that earns 7 percent interest compounded annually, how many years will it be before your inheritance grows to $35,000?

b)     Ib) If you let your money grow for 10.5 years at 7 percent, how much will you have?

c)      c) How long will it take your money to grow to $35,000.00 if you move into an account that pays 3 percent compounded annually? How long will it take your money to grow $35,000.00 if you move it into an account that pays 11 percent?

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

You are hoping to buy a house in the future and recently received an inheritance of $22,000.00. You intend to use your inheritance as a down payment on you house. If you put your inheritance in an account that earns 7 percent interest compounded annually, how many years will it be before your inheritance grows to $35,000? If you let your money grow for 10.5 years at 7 percent, how much will you have? How long will it take your money to grow to $35,000.00 if you move into an account that pays 3 percent compounded annually? How long will it take your money to grow $35,000.00 if you move it into an account that pays 11 percent? What does all this tell you about the relationship among interest rates, time, and future sums?

Explanation / Answer

a. 6.86 yrs

b. 44.76 K $

c. 15.7, 4.45 yrs

d. As interest rate increases large amount of future sum is obtained at less time.

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