Math, please please pleaqse help IF I DONT GET THIS I DONT PASS THE CLASS!?

Question

1. what effect will intrest rates and compunding frequency have on savings?

2. a) what should she do with her sabings untill she makes a decision?

b) how much intrest can she expect to earn while she makes up her mind?

3.a)what savings alterniative should she choos for 2 years?3 years?

b)should she consider more than one savings alterniatve?

c)what intrest can she expect to earn in 2 years?3 years?

4.a)if she wants to double her money, what intrest rate and compouding frequcency will she need for a 2-year term?a 3 year term?

b)is her goal of having $2400 grow to 4800 realistic?

c)what os a more realistic final amount?

5.a) should she consider investing in a low to moderate risk investment?

b)if so, what percent should she invest and what investments should she choose

YOU WILL TRULY BE A LIFE SAVER IF YOU HELP ME AT ALL WITH THESE QUESTIONS! THANK YOUU!

Answer 1

The effects on compounding interest is, well her savings will increased because it is compounding.

Makes a decision to what?

Good investment alternative, I'd go with mutual funds because it's not hard to understand and doesn't take much of one's time.

Interest rate vary depends on the investment type.

Okay, now here goes the math. $2400 to $4800 in 2 years that'll be like 100% interest with 1 compounding frequency (haha yea right).

Use the NPV calculation, I believe you can find it easily in your text book :-). P|A given that A is the compounding frequency.

Answer 2

It's a little hard to understand your question, because it seems like you have left out the actual problem.  All I can tell you is this:  When you put money in the bank it makes interest.  This is a certain percentage of money the bank pays you for "lending" them your money.  As you earn interest, the balance of your account increases making future interest earned based on that higher balance.  This is compounded interest.  To get an idea on current interest rates, you can do a web search.  Savings alternatives include such possibilities as CDs (certificates of deposit, which is like a savings account but you can't use your money until the end of the term of the CD is up - and that can be a matter of months or years) or regular savings accounts, stocks, bonds - there are many investment opportunities.  CDs would be a short-term savings route these days where you could temporarily put your money until you decide on a better long-term investment.  To double your money you are looking for a 50% return - not easy to find.  I don't know how to calculate the compounded term- a web search may be able to help you.  $2400 can grow to $4800 over a period of time with a diverse investment portfolio, such as stocks, bonds, mutual funds, etc.  Also, if you choose low risk investment you will receive a much lower rate of interest.  You would have to choose a very high risk level in order to try to reap a 50% interest rate.  That means you may lose the money easily before you double it.  You will have to do some researching as to how to make "her" money grow, as it's part of your homework.  You could search the web for "high yield investments"  "how to double my money"  "best investments for doubling money" etc.  Good luck!

Answer 3

You've left out some details, and forgot to use spell checker.

1.  The higher the rate, the more money you get.

The faster the compounding, the more money you get.

2. a)  Who?  What are her options?

In general, Invest in something with better interest than the rate of inflation (3%)

b)  That depends on what the rate is, and what her investment (principal) is.  If a bank, less than 3%.  If a mutual fund, maybe 10% if she's lucky.

3a) you haven't listed the options, so picking an alternative is a problem.

b) Yes, if she considers some things to be risky.  Diversifying may be an option.

c)  Once again, depends on what options she has available, and whcih one she chooses.

4. a)   Use the rule of 72, or 18 (years and interest rate add to 18, or multiply to 72, for an approximate value.)  With such short durations, though, you'd need 41% interest annually, to double in two years (square root of 2)  To double in three years, take the cube root of 2, and subtract 1, then multiply by  100 to get rate.

b) in 2 or 3 years, i doubt it in this economy, unless she's flipping condos.

c) 10% over 7 years.

5a)  Multiply risk by payout.  Then compare.