Question

Steven recently won $1 in the scratch-n-play lotto. His banker, Marianne, promises to pay him 1% per month if he will invest his money in her bank for 9.5 years. Part A: How much interest will Steven have earned after one year? Note that there are 12 compounding periods in one year. Write your answer as a percent rounded to two decimals, but don't include the percent sign (e. 0.1234321 should be written as 12.34). 12.68 % Part B: How much money will Steven have in the bank after 9.5 years? Round your answer to two decimals but don't include the dollar sign. $ 3.11 Part C: Given that Steven earns 1% per month, how many years (not months) would Steven have to wait until he had $1,000 in the bank account? Round your answer to two decimals. 55.98 % years

Answer 1

A)	FV= PV*(1+r)^n
	Where,
	FV= Future Value
	PV = Present Value
	r = Interest rate
	n= Number of years
	= $1*( 1+0.01)^12
	=1*1.12683
	= $1.1268
	Interest = 1.1268-1
	Interest rate = 0.1268/1
	=12.68%
B)	FV= PV*(1+r)^n
	Where,
	FV= Future Value
	PV = Present Value
	r = Interest rate
	n= Number of periods ie.12*9.5 =114
	= $1*( 1+0.01)^114
	=1*3.10911
	= $3.11
C)
	FV= PV*(1+r)^n
	Where,
	FV= Future Value
	PV = Present Value
	r = Interest rate
	n= Number of periods ( let us assume it as x)
	1000= $1*( 1+0.01)^x
	$1000 =1.01^x
	X =694.224
	Means 694.224 months
	coverted in years = 694.224/12
	=57.85 years
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