# Question

Your grandmother just gave you $6,000. You’d like to see what it might grow to if you invest it.

a. Calculate the future value of $6,000, given that it will be invested for five years at an annual interest rate of 6 percent.

b. Recalculate part (a) using a compounding period that is (1) semiannual and (2) bimonthly.

c. Now let’s look at what might happen if you can invest the money at a 12 percent rate rather than 6 percent rate; recalculate parts (a) and (b) for a 12 percent annual interest rate.

d. Now let’s see what might happen if you invest the money for 12 years rather than 5 years; recalculate part (a) using a time horizon of 12 years (annual interest rate is still 6 percent).

e. With respect to the changes in the stated interest rate and length of time the money is invested in parts (c) and (d), what conclusions can you draw?

a. Calculate the future value of $6,000, given that it will be invested for five years at an annual interest rate of 6 percent.

b. Recalculate part (a) using a compounding period that is (1) semiannual and (2) bimonthly.

c. Now let’s look at what might happen if you can invest the money at a 12 percent rate rather than 6 percent rate; recalculate parts (a) and (b) for a 12 percent annual interest rate.

d. Now let’s see what might happen if you invest the money for 12 years rather than 5 years; recalculate part (a) using a time horizon of 12 years (annual interest rate is still 6 percent).

e. With respect to the changes in the stated interest rate and length of time the money is invested in parts (c) and (d), what conclusions can you draw?

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