My lil sis needs help, and I dont understand
Shana, who is 11, was given a gift of $10,000. She wants to buy a car that costs that amount. The price of the car is expected to increae 6% a year. A bank will pay 7% simple interest per year on $10,000 in a seven-year time deposit account. Advise her whether to buy the car now, or deposit the money and buy the car when she is 18. CLEARLY SHOW ALL OF YOUR CALCULATIONS AND EXPLAIN YOUR REASONS.
2006-08-27 08:36:50 · 7 answers · asked by Anonymous in Education & Reference ➔ Homework Help
of course she must wait until shes 18 to buy the car because of the rates
2006-08-27 08:43:42 · answer #1 · answered by reii 3 · 0⤊ 0⤋
This really isn't that complicated. Since the principle ($10,000) and time (7 years) are the same, all you do is look at the rate (6% vs. 7%). Since 7% is higher than 6%, she'll have more in 7 years in the bank than the car will have increased at 6%.
2006-08-27 20:38:30 · answer #2 · answered by homeschoolmom 5 · 0⤊ 0⤋
10,000 x .06 = 600
600 x 7 years = 4200
10,000 + 4200 = 14,200 price of the car in 7 years.
10,000 x .07 x 7 = 4900
10,000 + 4900 = 14,900 is the earned principal and interest by the time she is 18. So shana will have $700 profit after the purchase of the car when she is 18.
2006-08-27 15:51:26 · answer #3 · answered by Believe me 3 · 0⤊ 0⤋
Alright, so the equation for simple interest is I=PRT, p= deposit or initial money, r= rate or percent, and t= time in years
I=PRT
I=10,000(.06)7
I=4,200 dollars more value of car in 7 years is 14,200
I=PRT
I=10,000 (.07)7
I=4,900 dollars more from bank in 7 years which totals to 14,900
so, i would recommend that she deposit the money in the bank and buy the car later, this way, she'll have enough money for the car plus an extra 700 for shopping ;)
2006-08-27 15:48:28 · answer #4 · answered by ~*Prodigious*~ 3 · 0⤊ 0⤋
Interest at 6% for 7 years
10000 x 6 =10600
10600x6=11236
11236x6=11910
11918x6=12633
12633x6=13391
13391x6=14194
14194x6=14990
Interest at 7%
10000x7=700
700x7=4900 Total 14900
i think this is right, but I've been out of school for 43 years
2006-08-27 15:49:56 · answer #5 · answered by Anonymous · 0⤊ 0⤋
The price of the car after 7 years:
I=PRT/100
I=10000*6*7/100
I=4200
so after 7 years,the car will cost $14200.
The amount of money in the bank after 7 years:
I=PRT/100
I=10000*7*7/100
I=4900
so after 7 years,the money in her bank will be $14900.
so it is advisable to buy the car after 7 years as she will be able to save $700.
P.S. I means interest,P means principal(amount of money on which interest is calculated),R means rate of interest and T means time in years.
2006-08-27 15:44:44 · answer #6 · answered by Diya 2 · 0⤊ 0⤋
Do your own homework.
2006-08-27 15:43:34 · answer #7 · answered by Barkley Hound 7 · 0⤊ 0⤋