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Determining the relationship among interest rates

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You are hoping to buy a house in the future and recently received an inheritance of $50000. You intend to use your inheritance as a deposit on your house.

(a) If you put your inheritance in an account that earns 7% interest compounded annually, how many years will it be before your inheritance grows to $75 000?

(b) If you let your money grow for 10.25 years at 7% compounded annually, how much will you have?

(c) How long will it take your money to grow to $75 000 if you move it into an account that pays 3% compounded annually? How long will it take your money to grow to $75 000 if you move it into an account that pays 11% compounded annually?

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

Reference no: EM132544291

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