Question

money planning
part 3 of 3 1 2 3 trying to earn:
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
$70,000
$60,000
$50,000
$40,000
value
$30,000
$20,000
$10,000
$0,000
0 5 10 15 20 25
years
— no - interest (0%) — 3.5% savings — 7% retirement
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
check answers →

Explanation:

Step1: Find 20yr 3.5% value

From graph, 3.5% at 20yrs: $\$22,000$

Step2: Find 20yr 0% value

From graph, 0% at 20yrs: $\$12,000$

Step3: Calculate difference (Q1)

$\$22,000 - \$12,000 = \$10,000$

Step4: Find 7% time to $\$20,000$

From graph, 7% reaches $\$20,000$ at ~10yrs

Step5: Find 3.5% time to $\$20,000$

From graph, 3.5% reaches $\$20,000$ at ~20yrs

Step6: Calculate time difference (Q2)

$20 - 10 = 10$ years

Answer:

Question 1: $\$10,000$
Question 2: 10 years