Time Value of Money Assignment | Homework For You
Please answer each part legibly if you are completing by hand. Thank you!
You are hoping to buy a house in the future and recently received an inheritance of $24,000. You intend to use your inheritance as a down payment on your house.
a. If you put your inheritance in an account that earns 7 percent interest compounded annually, how many years will it be before your inheritance grows to $33,000?
b. If you let your money grow for 10.5 years at 7 percent how much will you have?
c. How long will it take your money to grow to $33,000 if you move it into an account that pays 5 percent compounded annually? How long will it take your money to grow to $33,000 if you move it into an account that pays 13 percent?
d. What does all this tell you about the relationship among interest rates, time, and future sums?
There is a relationship between both the interest rate used to compound a present sum and the number of years for which the compounding continues and the future value of that sum.
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