100 Points Dum answers will be reported and deleted

1. Imagine you receive a graduation gift of $5,000 from a wealthy uncle with a letter
that encourages you to save the money for your old age. Also imagine that you are
able to average 9% interest on the principal.

a. How much (simple) interest will you receive on your savings after one year?


b. What will the value of your savings be after that one year?


c. What will the value be after 10 years (use the compound interest formula)?


d. How many years will it take for your savings to double in value?


e. Say you were 18 years of age when you deposited the money and you will
withdraw it at 66 years of age. How many times will the money have doubled in
value during that time?


f. How much money will be in the account when you withdraw it at 66?


2. Now imagine you are 66 and have withdrawn your savings. You have decided to gift
$5,000 to your young nephew or niece for graduation. Write a letter to accompany
the check that explains why he or she should start saving early.