Question

(Compound value) Stanford Simmons, who recently sold his Porsche, placed $10,800 in a savings account paying annual compound interest of 5 percent. a. Calculate the amount of money that will have accrued if he leaves the money in the bank for 3. 6, and 16 years. b. If he moves his money into an account that pays 7 percent or one that pays 9 percent, rework part (a) using these new interest rates c. What conclusions can you draw about the relationship between interest rates, time, and future sums from the calculations you have completed in this problem? a. What is the accrued value of $10,800 in a savings account paying annual compound interest of 5 percent for 3 years? $ (Round to the nearest cont.) What is the accrued value of $10,800 in a savings account paying annual compound interest of 5 percent for 6 years? $ (Round to the nearest cent.) What is the accrued value of $10,800 in a savings account paying annual compound interest of 5 percent for 16 years? $ (Round to the nearest cent) b. If the money was moved to an account that pays 7 percent, what is the accrued value of $10,000 in the account for 3 years? S (Round to the nearest cent.) If the money was moved to an account that pays 7 percent, what is the accrued value of $10,800 in the account for 6 years? $ (Round to the nearest cent.) If the money was moved to an account that pays 7 percent, what is the accrued value of $10,800 in the account for 16 years? $ (Round to the nearest cent.) If the money was moved to an account that pays 9 percent, what is the accrued value of $10,800 in the account for 3 years? $ (Round to the nearest cent) If the money was moved to an account that pays 9 percent, what is the accrued value of $10,800 in the account for 6 years? $ (Round to the nearest cont.)

Answer 1

Answ er:

Given

A)

Deposit D=10800

interest rate r=5%

Number of Years N= 3

So Amount aacrued F=D*(1+r)^N

F=10800*(1+5%)^3=$12502.35

Number of Years N= 6

So Amount aacrued F=D*(1+r)^N

F=10800*(1+5%)^6=$14473.03

Number of Years N= 16

So Amount aacrued F=D*(1+r)^N

F=10800*(1+5%)^16=$23575.05

B)

Deposit D=10800

interest rate r=7%

Number of Years N= 3

So Amount aacrued F=D*(1+r)^N

F=10800*(1+7%)^3=$13230.46

Number of Years N= 6

So Amount aacrued F=D*(1+r)^N

F=10800*(1+7%)^6=$16207.89

Number of Years N= 16

So Amount aacrued F=D*(1+r)^N

F=10800*(1+7%)^16=$31883.37

Deposit D=10800

interest rate r=9%

Number of Years N= 3

So Amount aacrued F=D*(1+r)^N

F=10800*(1+9%)^3=$13986.31

Number of Years N= 6

So Amount aacrued F=D*(1+r)^N

F=10800*(1+9%)^6=$18112.68

Number of Years N= 16

So Amount aacrued F=D*(1+r)^N

F=10800*(1+9%)^16=$42879.30

C)

From above calculation we find that there is positive relation ship.