Question

money planning
part 3 of 3
you got it right - just one more to go!
yi wang is 27 years old and has $12,000 in savings. she can either:

1. put her money in a no - interest checking account (that is, has 0% return),
2. put it in a savings account and earn 3.5% annual interest, or
3. put it into a retirement account of stocks and bonds earning 7% annual gains

the following graph shows the value of the three different accounts at various times.
value of account at different interest rates
(graph description: the x - axis is years with values from 0 to 25, and the y - axis is value with values from $0,000 to $70,000. there are three lines: red for no - interest (0%), blue for 3.5% savings, and black for 7% retirement. at year 0, all start around $12,000. as years increase, the no - interest line stays flat, the 3.5% line increases slowly, and the 7% line increases more rapidly.)
question 1: 20 years from now, yi will be 47. at that time, how much more would her $12,000 investment be worth if yi put this money in the savings account (3.5%) instead of keeping this money in a no - interest checking account (0%)?
your answer should be within $2000 of the exact amount. $
question 2: how much longer will it take for yis $12,000 to grow to $20,000 at 3.5% than at 7%?
your answer should be within 1 year of the exact number of years. years

Explanation:

Step1: Identify 20yr values from graph

From the graph:

• 3.5% savings at 20 years: $\$25,000$
• 0% checking at 20 years: $\$12,000$

Step2: Calculate difference for Q1

$\$25,000 - \$12,000 = \$13,000$

Step3: Find years for $\$20,000$ (graph)

• 7% retirement to $\$20,000$: ~10 years
• 3.5% savings to $\$20,000$: ~15 years

Step4: Calculate year difference for Q2

$15 - 10 = 5$ years

Answer:

Question 1: $\$13,000$
Question 2: 5 years