2.1 Practice - Simple and Compound Interest
1) Find the interest on a used car loan of $5000 at a rate of 16% for a period of 8 months.
2) Find the interest earned on an investment of $10,000 into a money market account that pays a simple interest rate of 1.75% over a 39 wk period.
3) Find the amount owed on an investment of $10,000 into a money market account that pays a simple interest rate of 1.75% over a 39 wk period.
4) Find the amount due on a loan of $600 at 15.75% interest after 21 months.
5) What is the annual interest rate earned by a 33-day T-bill with a maturity value of $1,000 that sells for $996.16? (Use 360 days for a year)
6) If you borrow $3000 at 14% simple interest for 10 months, how much will you owe in 10 months? How much interest will you pay?
7) A loan of $2500 was repaid at the end of 39 weeks with a check for $2812.50. What annual rate of interest was charged?
8) An accountant for a corporation forgot to pay the firm’s income tax of $725,896.15 (uh-oh) on time. The government charged a penalty of 12.7% annual interest for the 34 days the money was late. Find the total amount that must be paid.
9) If an investor wants to earn an annual interest rate of 10.76% on a 26 week T-bill with a maturity value of $5,000, how much should the investor pay for the bill?
10) Jessie buys 100 shares of stock at $29.52 per share and then sells the stock 9 months later at $37.85 per share. Transaction fees are 1% of the total transaction. What annual interest rate did Jessie earn?
11) How long will it take for a CD to double, if money earns a simple interest rate of 4.8%? Round up nearest year.
12) Given r=12%, compounded monthly for 8 years; find n (number of months) and i (rate per month). Write i in decimal form
13) Given r=6%, compounded quarterly for 50 years. find n (number of months) and i (rate per month). Write i in decimal form.
14) Grandparents deposited $6,000 into a grandchild’s account toward a college education. How much money (to the nearest dollar) will be in the account 17 years from now if the account earns 9% compounded monthly?
15) How much should you deposit initially in an account paying 10% compounded semiannually in order to have $1,000,000 in 30 years? b) compounded monthly? c) compounded daily? d) continuous compounding
16) You have $7,000 toward the purchase of a $10,000 automobile. How long will it take the $7000 to grow to the $10,000 if it is invested at 9% compounded quarterly? (Round up to the next highest quarter if not exact. Always round UP to the next period unless it comes out to an exact value. The reason for this is money is only compounded at each period.) Make sure you solve this using logarithms.
18) Find the APY of each. Which is the better investment: 9% compounded monthly or 9.1% compounded quarterly?
19) Mr. Kang borrowed $5200 from his friend to pay for remodeling work on his house. He repaid the loan 10 months later with simple interest at 7%. His friend then invested the proceeds in a 5-year CD paying 6.3% compounded quarterly. How much will his friend have at the end of the 5 years?
20) In the New Testament, Jesus commends a widow who contributed 2 mites (roughly 1/4 cent) to the temple treasury. Suppose the temple invested those mites at 4% compounded quarterly. How much would the money be worth 2000 years later? (1/4 cent is $0.0025)
21) Suppose you invest $250 over a period of 4 years. If money is compounded monthly, what annual interest rate must you receive in order to have $1000 at the end of 4 years. What root did you have to use to solve this?
Show Answer
I=$533.33
2) Find the interest earned on an investment of $10,000 into a money market account that pays a simple interest rate of 1.75% over a 39 wk period.
Show Answer
I=$131.25
3) Find the amount owed on an investment of $10,000 into a money market account that pays a simple interest rate of 1.75% over a 39 wk period.
Show Answer
A=10000+131.25=$10,131.25
4) Find the amount due on a loan of $600 at 15.75% interest after 21 months.
Show Answer
A=$765.38
5) What is the annual interest rate earned by a 33-day T-bill with a maturity value of $1,000 that sells for $996.16? (Use 360 days for a year)
Show Answer
4.2%
6) If you borrow $3000 at 14% simple interest for 10 months, how much will you owe in 10 months? How much interest will you pay?
Show Answer
A=$3350, I=$350
7) A loan of $2500 was repaid at the end of 39 weeks with a check for $2812.50. What annual rate of interest was charged?
Show Answer
16.67%
8) An accountant for a corporation forgot to pay the firm’s income tax of $725,896.15 (uh-oh) on time. The government charged a penalty of 12.7% annual interest for the 34 days the money was late. Find the total amount that must be paid.
Show Answer
$734,483.60
9) If an investor wants to earn an annual interest rate of 10.76% on a 26 week T-bill with a maturity value of $5,000, how much should the investor pay for the bill?
Show Answer
$4744.73
10) Jessie buys 100 shares of stock at $29.52 per share and then sells the stock 9 months later at $37.85 per share. Transaction fees are 1% of the total transaction. What annual interest rate did Jessie earn?
Show Answer
34.24%
11) How long will it take for a CD to double, if money earns a simple interest rate of 4.8%? Round up nearest year.
Show Answer
20.8=21 years
12) Given r=12%, compounded monthly for 8 years; find n (number of months) and i (rate per month). Write i in decimal form
Show Answer
n=96 mo., i=0.01
13) Given r=6%, compounded quarterly for 50 years. find n (number of months) and i (rate per month). Write i in decimal form.
Show Answer
n=200, i=0.015
14) Grandparents deposited $6,000 into a grandchild’s account toward a college education. How much money (to the nearest dollar) will be in the account 17 years from now if the account earns 9% compounded monthly?
Show Answer
A=$27,551.32
15) How much should you deposit initially in an account paying 10% compounded semiannually in order to have $1,000,000 in 30 years? b) compounded monthly? c) compounded daily? d) continuous compounding
Semi-annual Answer
$53,535.52
Monthly Answer
$50,409.83
Daily Answer
$49807.53
Continuous Answer
$49,707.87
16) You have $7,000 toward the purchase of a $10,000 automobile. How long will it take the $7000 to grow to the $10,000 if it is invested at 9% compounded quarterly? (Round up to the next highest quarter if not exact. Always round UP to the next period unless it comes out to an exact value. The reason for this is money is only compounded at each period.) Make sure you solve this using logarithms.
Show Answer
16.03 ----> 17 quarters
18) Find the APY of each. Which is the better investment: 9% compounded monthly or 9.1% compounded quarterly?
APY 9%, Monthly
9.38%
APY, 9.1% Quarterly
9.42%
Show Answer
9.1% with quarterly compounding
19) Mr. Kang borrowed $5200 from his friend to pay for remodeling work on his house. He repaid the loan 10 months later with simple interest at 7%. His friend then invested the proceeds in a 5-year CD paying 6.3% compounded quarterly. How much will his friend have at the end of the 5 years?
Amount Mr Kang Paid Back
$5503.33
Final Answer
$7522.50
20) In the New Testament, Jesus commends a widow who contributed 2 mites (roughly 1/4 cent) to the temple treasury. Suppose the temple invested those mites at 4% compounded quarterly. How much would the money be worth 2000 years later? (1/4 cent is $0.0025)
Show Answer
A=$93,000,000,000,000,000,000,000,000,000,000.00 (If I counted enough zeros.)
21) Suppose you invest $250 over a period of 4 years. If money is compounded monthly, what annual interest rate must you receive in order to have $1000 at the end of 4 years. What root did you have to use to solve this?
Answer
3.52%
Rootr
48th