6.2.1: Compound Interest (Exercises)

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SECTION 6.2 PROBLEM SET: COMPOUND INTEREST

Do the following compound interest problems involving a lump-sum amount.

1) What will the final amount be in 4 years if $8,000 is invested at 9.2% compounded monthly.?	2) How much should be invested at 10.3% for it to amount to $10,000 in 6 years?
3) Lydia's aunt Rose left her $5,000. Lydia spent $1,000 on her wardrobe and deposited the rest in an account that pays 6.9% compounded daily. How much money will she have in 5 years?	4) Thuy needs $1,850 in eight months for her college tuition. How much money should she deposit lump sum in an account paying 8.2% compounded monthly to achieve that goal?
5) Bank A pays 5% compounded daily, while Bank B pays 5.12% compounded monthly. Which bank pays more? Explain.	6) EZ Photo Company needs five copying machines in 2 1/2 years for a total cost of $15,000. How much money should be deposited now to pay for these machines, if the interest rate is 8% compounded semiannually?
7) Jon's grandfather was planning to give him $12,000 in 10 years. Jon has convinced his grandfather to pay him $6,000 now, instead. If Jon invests this $6,000 at 7.5% compounded continuously, how much money will he have in 10 years?	8) What will be the price of a $20,000 car in 5 years if the inflation rate is 6%?

SECTION 6.2 PROBLEM SET: COMPOUND INTEREST

Do the following compound interest problems.

9) At an interest rate of 8% compounded continuously, how many years will it take to double your money?	10) If an investment earns 10% compounded continuously, in how many years will it triple? .
11) The City Library ordered a new computer system costing $158,000; it will be delivered in 6 months, and the full amount will be due 30 days after delivery. How much must be deposited today into an account paying 7.5% compounded monthly to have $158,000 in 7 months?	12) Mr. and Mrs. Tran are expecting a baby girl in a few days. They want to put away money for her college education now. How much money should they deposit in an account paying 10.2% so they will have $100,000 in 18 years to pay for their daughter's educational expenses?
13) Find the effective interest rate for an account paying 7.2% compounded quarterly.	14) If a bank pays 5.75% compounded monthly, what is the effective interest rate?
15) The population of the African nation of Cameroon was 12 million people in the year 2015; it has been growing at the rate of 2.5% per year. If the population continues to grow that rate,what will the population be in 2030? (http://databank.worldbank.org/data on 4/26/2016)	16) According to the Law of 70, if an amount grows at an annual rate of 1%, then it doubles every seventy years. Suppose a bank pays 5% interest, how long will it take for you to double your money? How about at 15%?