FRL 300 HW #2
Student: ______________________________________________________________________
1. Compound Bank pays interest of 4 percent compounded annually. Simple Bank pays 4.25
percent simple interest. Which one of the following statements is true if you invest $1,000 in
each bank for 6 years?
A. Compound Bank will pay you a total of $264.86 in interest over the 6 years.
B. Simple Bank will pay you $10.32 more in interest over the 6 years than Compound Bank will.
C. Simple Bank will pay you a total of $255 in interest over the 6 years.
D. Simple Bank will pay you $8.68 less in interest than Compound Bank over the 6 years.
2. Steve wants to make one lump sum deposit today so that he can have $650,000 twenty-five
years from now. He can earn 6.5 percent, compounded annually. How much must he deposit
today?
3. Samantha has $4,308 saved today. She wants to go on vacation as soon as she has $5,000
saved. How long does she have to wait for her vacation if she earns 3.75 percent compounded
annually?
4. Delta Construction currently pays an annual dividend of $1.10 per share. At what rate must the
company increase its dividend if it wants to pay $1.50 a share three years from now?
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- Spring '09
- Interest, simple bank, A. Compound Bank, Compound Bank
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