(Related to The Business of Life: Saving for Your First House) (Future value) 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 8 percent interest compounded annually, how many years will it be before your inheritance grows to $31,000 ?
b. If you let your money grow for 9.5 years at 8 percent, how much will you have?
c. How long will it take your money to grow to $31,000 if you move it into an account that pays 3 percent compounded annually? How long will it take your money to grow to $31,000 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?