Math1003 Algebra and Calculus, Fall 2011
Name:
Ka Yee Leslie TSANG
HomeworkII : Due 09/21/2011 at 11:50pm HKT
The three fundamental formulas you need for solving the problems in this
homework set are the following:
The Compound Interest Formula:
A
=
P
(
1
+
r
m
)
mt
where m = number of compounding in one year, t = number of years, r = annual
interest rate, P = principal, and A = compound amount.
The Future Value of an Annuity:
FV
=
PMT
(
1
+
i
)
n

1
i
where FV = the future value of the annuity, i = interest rate per period, PMT =
periodic payment, and n = number of payments.
The Present Value of an Annuity:
PV
=
PMT
1

(
1
+
i
)

n
i
where PV = the present value of the annuity, i = interest rate per period, PMT =
periodic payment, and n = number of payments.
To analyse a basic problem in ﬁnance, sketch a diagram to show clearly the
periods, interest rate per period and payments involved.
1.
(2 pts) If $100 is borrowed and the interest after 24 months
is $36, what is the annual interest rate for a simple interest loan?
Rate =
%
Answer(s) submitted:
•
18
(correct)
2.
(2 pts) Gordon has heard that fusion powered SUV’s will
be available in 10 years at a price of 120000 dollars. How much
should he invest now, at 8 percent interest compounded annu
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