Question

Problem 1

Part A: (Simple Interest) Rami has $1,500 in his bank account. He earns simple interest of 8% per year.

a- Deduce the value of the account (𝑃𝑡 =?) after 3 years.

b- Suppose Rami wishes to buy a car for $4,500. Will he be able to buy it after 3 years? (No calculation needed)

Part B: (Interest compounded semi-annually) Calculate the present value (𝑃0 =? ) of $20,000 to be received in 5 years’ time when the discount rate is 5% per year, compounded semi-annually.

Problem 2 Part A: (Simple interest)

A savings account of $8,000 earns simple interest of 6% per annum.

a- Calculate the amount (I =?) received after 5 years. b- Deduce the value of the account (𝑃𝑡 =?) after 5 years.

Part B: (Interest compounded semi-annually) Mohammad is saving $5,000 in a bank X for 3 years at 8% per annum compounded semiannually. Calculate the total value of the amount

Problem 3 (Interest compounded quarterly) As a graduation gift, your parents opened a bank account with $5,000 under your name. This account pays 5% interest rate per annum; compounded quarterly. If you decided to save the money over two years, by how much will your balance increase after two years?