Question

1. you want to buy your dream car which will cost you $5900. If you could invest your entire savings of $3500 at an annual interest of 12%, how long (in years rounded to two decimal places) would you have to wait until you have accumulated enough money to buy the car? answer

2. You want to buy a house in 9 years and expect to need $25000 for a down payment. If you have $14000 to invest, how much interest do you have to earn (compounded annually) to reach your goal? (Enter your answers as a decimal rounded to 4 decimal places, not a percentage. For example, enter 0.0843 instead of 8.43%)

Answer 1

Part 1:

Number of years required for $3,500 to grow to $5,900 is 4.61 years, calculated using the following formula:

FV= PV*(1+r)^n

Where FV= Future Value ($5,900), PV= Present Value ($3,500), r= rate of interest (12%) and n= period (5 years).

Hence, 5900=3500*(1+12%)^n

1.12^n = 5900/3500= 1.685714

Number of years (Value of n) is calculated as follows:

Part 2:

Interest rate required for $14,000 to grow to $25,000 in 9 years is 0.0665 as follows: