Question

1)Nicole wants to accumulate $ 8,000 at the end of 5 years making equal money deposits at the end of each year for the next 5 years. If Nicole can earn 7% of her investments, how much should she deposit at the end of each year to meet her goal (accumulate $ 8,000)?

2)Mr. Roman wants to determine how long it will take for an initial deposit of $ 10,000 to double.

a)If Mr. Román earns 10% annual interest on the deposit, how long will it take him to double his money?

b)How long would it take you to double the $ 10,000 if you could only earn 7% annual interest?

c)How long would it take you to double the $ 10,000 if you could earn 12% annual interest?

d)When reviewing your findings in parts a, b, and c, indicate what relationship exists between the interest rate and the amount of time it will take Mr. Johnson to double your money.

Answer 1

1: Using financial calculator

Input: Fv = 8000

N = 5*12 = 60

I/Y = 7/12

Solve for PMT as -111.74

The monthly payment must be $111.74

2: a: Using financial calculator

Input: PV = -10000, FV = 20000, I/Y = 10

Solve for N as 7.27

It will take him 7.27 years

B: Using financial calculator

Input: PV = -10000, FV = 20000, I/Y = 7

Solve for N as 10.24

It will take him 10.24 years

C: Using financial calculator

Input: PV = -10000, FV = 20000, I/Y = 12

Solve for N as 6.12

It will take him 6.12 years

D: Higher the interest rate, lesser will be the amount taken to double the money.