5.5: Review Exercises
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You borrow $500 for a trip at 11% annual simple interest for two years.
- Find the interest you will pay on the loan.
- How much will you have to pay the bank at the end of the two years?
- A U.S. Treasury Bond earns 5.2% annual simple interest. If Suzy earns $4,160 in interest after 10 years, how much was Suzy's bond worth originally?
- Darren deposited $1,500 into a savings account and earned $180 of simple interest at a 4% annual interest rate. How long was Darren's money in the account?
- Find the annual simple interest rate on an account if you invest $1,000 and it is worth $1,200 three years later. Round to the nearest hundredth of a percent .
- Derek borrowed $1,500 from his parents at a 5.55% annual simple interest rate for 18 months. How much will Derek pay back to his parents?
- A payday loan company offers a $500 loan for 60 days. It charges you a fee of a $50 fee for the loan. Considering this fee is really simple interest, what is the annual interest rate charged by the company?
Solve these problems, using the TVM Solver app where appropriate.
- You deposit $300 in an account earning 5% interest compounded annually. How much will be in the account in 10 years?
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You deposit $2,000 in an account earning 3% interest compounded monthly.
- How much will you have in the account in 20 years?
- How much interest will you earn during this time?
- How much would you need to deposit in an account now in order to have $6,000 in the account in 8 years? Assume the account earns 6% interest compounded monthly.
- Suppose you need $1,250 to purchase a new TV in 3 years. You have $1,000 to deposit into a savings account now. What annual interest rate is needed if the interest is compounded monthly? Round to the nearest hundredth of a percent.
- Amira deposited $2,000 into a savings account earning 4.59% APR compounded monthly. How many years will it take her original deposit to grow to $5,000?
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You deposit $200 every month for 30 years into an account earning 3% interest compounded monthly.
- How much will you have in the account in 30 years?
- How much total money will you have put into the account?
- How much interest will you have earned during those 30 years?
- At age 30, Suzy starts an IRA to save for retirement. She wants to have $750,000 by the time she retires in 35 years at age 65. If she can count on an APR of 6%, how much should she be putting in the IRA each month?
- Business Enterprises is saving up some money to expand. The company deposits $25,000 into an account initially and then begins depositing $5,000 every quarter thereafter. The account earns an APR of 7.2% compounded quarterly. How much money will the company have in the account after 5 years?
- You would like to have $20,000 to spend on a new car in five years. You open a savings account with an APR of 4.85%. How much must you deposit each week to reach this goal?
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You want to be able to withdraw $30,000 each year from an annuity for 25 years. Your account earns 8% interest annually.
- How much do you need in your account at the beginning of the 25 years?
- How much total money will you withdraw from the account over 25 years?
- How much of the money you withdraw is interest that you earned?
- Loren already knows that he will have $1,000,000 when he retires. If he sets up a payout annuity for 30 years in an account paying 10% interest, how much could the annuity provide in income each month?
- Chris has saved $200,000 for retirement, and it is in an account earning 6% interest. She plans to withdraw $3,000 every month. How many months will her retirement fund last?
- You want to buy a $25,000 car. The company is offering a 2% interest rate for 48 months (4 years) with no money down. What will your monthly payments be?
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You have a credit card balance of $1,245 to pay off. The interest rate on the balance is 10% compounded monthly. You decide to pay $50 each month towards the debt and will no longer charge anything to the account.
- To the nearest whole month, how long will it take to pay off the credit card?
- How much will you pay the credit card company during this time?
- What part of your total payments will be the interest?
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Lynn bought a $200,000 condo. Her down payment for the condo was 20% and she financed the rest through a 8% mortgage for 30 years.
- What was the amount of Lynn's down payment?
- How much did Lynn borrow for the mortgage?
- What is Lynn's monthly payment?
- How much will Lynn pay in all over the 30 years?
- How much does Lynn pay in interest over the 30 years?
- If Lynn could find a better mortgage rate of 6.5%, how much cheaper would her monthly payment be?
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Marie can afford a $250 per month car payment. She’s found a 5-year loan at 7% interest.
- How expensive of a car can she afford?
- How much total money will she pay the loan company?
- How much of that money is interest?