You are hoping to buy a house in the future and recently received an inheritance of $20,000.
Question:
a. If you put your inheritance in an account that earns a 7 percent interest rate compounded annually, how many years will it be before your inheritance grows to $30,000?
b. If you let your money grow for 10.25 years at 7 percent, how much will you have?
c. How long will it take your money to grow to $30,000 if you move it into an account that pays 3 percent compounded annually? How long will it take your money to grow to $30,000 if you move it into an account that pays 11 percent?
d. What does all of this tell you about the relationship among interest rates, time, and future sums?
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Related Book For
Financial Management Principles and Applications
ISBN: 978-0133423822
12th edition
Authors: Sheridan Titman, Arthur Keown, John Martin
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