Question

a.Calculate the amount of money that will accumulate if Leslie leaves the money in the bank for 2, 6, and 16 years

.b. Suppose Leslie moves her money into an account that pays 9 percent or one that pays 11 percent. Rework part (a ) using 9 percent and 11 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 $9,800 in a savings account paying annual compound interest of 7 percent, the amount of money that will accumulate if Leslie leaves the money in the bank for

2 year(s) is 11,220.02.

(Round to the nearest cent.)

If she leaves the money in the bank for 6 years, the amount of money that will accumulate is $

If she leaves the money in the bank for 16 years, the amount of money that will accumulate is $

Answer 1

Future value or accumulated value is the amount that would be received after certain period of time on investments made
Future value = Present value*((1+r)^n)
where r is the interest rate
n is the number of years
a) If interest rate is 7% and number of years is 2 years, accumulated value is shown below
Future value	9800*(1.07^2)
Future value	If interest rate is 7% and number of years is 6 years, accumulated value is shown below
The accumulated value would be $11,220.02
If interest rate is 7% and number of years is 6 years, accumulated value is shown below
Future value	9800*(1.07^6)
Future value	$14,707.16
The accumulated value would be $14,707.16
If interest rate is 7% and number of years is 16 years, accumulated value is shown below
Future value	9800*(1.07^16)
Future value	$28,931.20
The accumulated value would be $28,931.20
b)
If interest rate is 9% and number of years is 2 years, accumulated value is shown below
Future value	9800*(1.09^2)
Future value	$11,643.38
The accumulated value would be $11,643.38
If interest rate is 11% and number of years is 2 years, accumulated value is shown below
Future value	9800*(1.11^2)
Future value	$12,074.58
The accumulated value would be $12,074.58
c)
With the increase in interest rates and the number of years being same, the future value of the savings increases that is increase in interest rate increases future value
Therefore, interest rates and future value has direct relationship
With the increase in number of years of investment and the interest rate being same, the future value of the savings increases that is with increase in time the future value would be more
Therefore, time and future value has direct relationship