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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

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Collen Von
Collen VonLv2
28 Oct 2019

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Related questions

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?

Independent parts

a- Calculate the present value (P0 =?) of $6,500 to be received in two years’ time when the discount rate is 8% per annum, compounded annually.

b- $700 is invested at nominal interest rate of 6% per annum. Calculate the amount due (Pt =?) at the end of 7 years if interest is compounded semiannually. c- Calculate the annual rate of interest (i =?) required for $10,000 to become $80,000 in 15 years. Assume quarterly compounding.

d- A bank pays 8% interest compounded annually. Calculate the number of years (t =?) it will take for $100,000 to grow to its doubled value? e- A family wants to start a child education plan to pay for their daughter’s university tuition in 18 years.

The total 4-year tuition will cost $100,000. They have $10,000 to invest now at a continuously compounded interest rate,

i. Find i. If a bank is willing to give them a rate of 10% compounded continuously, will it suffice?

a- Consider the total value of a $4,000 principal after 2 years in a savings account, which pays 7% per year without compounding. Compute the future value.

b- How much should a person deposit now to yield $3,000 at the end of 4 years with interest compounded annually at 5% per year?

c- Find the present value of $7,500 5 years from now if interest is compounded quarterly at an 8% annual interest rate.

d- If a sum of $7,000 is invested at an annual rate of 8% that is quarterly compounded. What is the time needed to become $10,500?

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