Background: During the last week, Sundara has read about different situations that involve money, interest rate, and different amounts of time. She has gotten interested in the major effects that time and interest rates have on the amount of money necessary to do things and the significant growth in the amount of money when a large number of years are considered. In all cases, the interest focuses on the amount of money at the end of the time period. Information: The four situations are described here: A. Manhattan Island was purchased in 1626 for $24. After 385 years in 2011, at 6% per year compounded interest, the current value must be very large. B. At the age of 22, if she saved only $2000 per year for the next 10 years (starting next year) and made a return of 6% per year, by today’s standards, she would have accumulated a nice sum at the age of 70. C. A corporation invested $2 million in developing and marketing a new product in 1945 (just after World War II, this was a lot of money) and has made a steady net cash flow of $300,000 per year for some 65 years. Sundara estimated the annual rate of return must be quite good, especially given that she is lucky to earn 4% per year on her own investments these days. D. A friend, who is not good with money, went to a pawn shop and borrowed $200 for one week and paid $30 in interest. Sundara thought this might be a pretty good deal, in case she ever ran low on cash. However, she did not know whether the interest was simple or compounded monthly, and how much may be owed were this loan not paid off for 1 year.

Answer rating: 100% (QA)

Answer Ans 1 2 covered together in each case A Manhattan Insland Purchase cost in 1626 240 Interest rate 6 per year compounding rate no of years n385 ... View the full answer