Question

Leslie​ Mosallam, who recently sold her​ Porsche, placed ​$8,600 in a savings account paying annual compound interest of 6 percent.

a. Calculate the amount of money that will accumulate if Leslie leaves the money in the bank for 2​,

6​, and 16 ​year(s).

b. Suppose Leslie moves her money into an account that pays 8 percent or one that pays 10 percent

c. What conclusions can you draw about the relationship between interest​ rates, time, and future sums from the calculations you just​ did?

​(a​) After placing $8,600 in a savings account paying annual compound interest of 6%, the amount of money that will accumulate if Leslie leaves the money in the bank for 2 years is __? (round to the nearest cent).

Answer 1

A- FV = pv*(1+r)^n =8600*(1.06)^2 =9662.96

FV = pv*(1+r)^n =8600*(1.06)^6 =12199.26

FV = pv*(1+r)^n =8600*(1.06)^16 =21847.02

3-Suppose money is invested for 6 Years

if interest rate is 8%

FV = pv*(1+r)^n =8600*(1.08)^6 = 13647.12

if interest rate is 10%

FV = pv*(1+r)^n =8600*(1.10)^6 = 15235.42

He will go with 10% rate of interest

c-As the interest rate, time period will increase future sum of money will also increase while both will decrease the future sum of money will decrease.

(a) A- FV = pv*(1+r)^n =8600*(1.06)^2 =9662.96