Answer:
A) We need to determine the n in the following equation: FV = PV (1 + r)ⁿ
r = 9% ; FV = 32,000 ; PV = 18,000
32,000 = 18,000 (1.09ⁿ)
32,000 / 18,000 = 1.09ⁿ
1.7778 = 1.09ⁿ
n = (log 1.7778) / (log 1.09) = 6.68 years
B) FV = 18,000 (1.09⁹°⁷⁵) = 18,000 x 2.32 = $41,704
C) if r = 4% ; FV = 32,000 ; PV = 18,000
n = (log 1.7778) / (log 1.04) = 14.67 years
if r = 12% ; FV = 32,000 ; PV = 18,000
n = (log 1.7778) / (log 1.12) = 5.08 years
D) The higher the interest rate, the shorter it takes for money to grow to a certain amount. The higher the interest rate, the more money you will have after a certain amount of years.
