2-

You receive a

$7,000

check from your grandparents for graduation. You decide to save it toward a down payment on a house. You invest it earning

7%

per year and you think you will need to have

$14,000

saved for the down payment. How long will it be before the

$7,000

has grown to

$14,000

?

To double the money you received from your grandparents, it will take

nothing

years.

3-

A local bank is running the following advertisement in thenewspaper: "For just

$1,000

we will pay you

$100

forever!" The fine print in the ad says that for a

$1,000

deposit, the bank will pay

$100

every year in perpetuity, starting one year after the deposit is made. What interest rate is the bank advertising (what is the rate of return of this investment)?

The interest rate the bank is advertising is

nothing%.