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Unformatted text preview: MA170 Week 4 Report: Compound Interest  Part I Name: ____SOLUTIONS______________ Lab: Fall 2010 1. [5 marks ] Two years and 8 months ago Gazoo took a $3000 loan with an interest rate of j 4 = 6% . If no payments have been made on the debt, determine how much must he pay now to pay the debt with interest using (a) the exact method; Amount of time in years: 2 + 8 12 = 8 3 ) n = 4 & 8 3 ¡ = 32 3 S = P (1 + i ) n = 3000 & 1 + : 06 4 ¡ 32 = 3 : = $3516 : 35 (b) the practical method. n = ¢ 32 3 £ = ¢ 10 2 3 £ = 10 periods ) S = 3000 & 1 + : 06 4 ¡ 10 & 1 + : 06 4 & 2 3 ¡¡ : = $3516 : 44 OR 2 3 of a period = 2 3 (3) = 2 months ) S = 3000 & 1 + : 06 4 ¡ 10 & 1 + 0 : 06 & 2 12 ¡¡ : = $3516 : 44 2. [5 marks ] Find the principal P that must be invested now to accumulate to $5000 at j 2 = 4% in three years and 10 months using (a) the exact method; amount of time in years: 3 + 10 12 = 23 6 n = 2 & 23 6 ¡ = 23 3 P = S (1 + i ) & n = 5000 & 1 + : 04 2 ¡ & 23 = 3 : = $4295 : 71 (b) the approximate method....
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 Fall '11
 F.Vinette
 Math, Decimal, investment period, exact method, Gazoo

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