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Practice Materials - Compound Interest

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Practice Materials - Compound Interest

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qurrer 6 econ TO THE AATHQRADCS OF Puce 7 o/ SSS SSS S= Wes 2then Int © O.695147181 + O6sRSTI8L 10 0 : \ = 0.069318 ° 2nd, then e* 1.071773463 ‘*. 1071773463 1 1 . = 7773463 a Calculator Keystroke Display | then PV tl 2, then FV 2 10, them 8°, 10 In Problems I through 4, find the ftue vale atthe stated nominal interest rate compounded annually (once a yt) 5200; 20 years; $ percent. 4. $400; 40 years; 8 percent years: 6 percent. ‘ 4. $500; 15 years; 7 percent. In rotems 5 though 8, fn te ure valve wsing he appropri meet rand rambo per ANH, 8 yeas 8 percent compounded quae 1, $600;20 yeas; 8 percent compoanded semiannually. "| +, & $250, 3 yeas 2 percent compounded monthly. $1,000, 10 years 16 perce compounded quan. Peoae, yeas wilittakeat7 erent compqunded Wha the cate of terest compounded semiannually aglly for $5,000 o amount to $20,002 at which $5,00 wil grow to 12,00 8 yeas. Yona yen set 1h Aan pays 5.25 ded cally oncet- L a 185.25 percent compounded daly on cr. doubt 10 perctnt compounded annually? .-) titleateaccoulis runing for 6 years. Using 365 days eg yea, compat the future ale ofa depot of ind the rate of interest compounded annually at a a sum of money wl double 20 ers. | $5.00 fo 6 yeas 27 = Fike P a Scanned with CamScanner a0 ay MONTANA APA RS A FMA 66 PROBLEM SET 6-2 (concuded) 1H Atbank pays 5.25 percent compounded daily on cere I lain accoums, Find the fiure value of a geposit of $2,000 for 45 day, dye many years willittake at9 percent cimpounded ancoally for $9.000 to grow to $10,000? “Wun the computer program in Section 6.7 for Prob- Jems 1 through 4. JA. a) Modify the computer program in Section 6.7 $0 that it will compute any one ofthe thre param cers Fi and, given P and the ther 10 poe sy a ate of inst compounded ane Wil 51.000 gro 0 $5,000 in 10 yeas? by Ron the param in (2) fr Problems $treveh 16. «) Mociy the program in (a) 30th ont 3 and m into the program instead 1+ wo Problems 5 through <4) Run the program in (c) for rameters, 16. {11 COMPOUND As with imple interest, we do not relly need 2 separate formula for calculating DISCOUNT: the present ae However, itis coment to have such a formula $0, dividing PRESENT both sides ofthe future value formula VALUE rene ——— . 7 TDelaen whe mala bY CE HTS we have ce ob Fete ; F at wey Pe a . By the definition ofa negative exponent, then, Bs “= Fl + iy". poate Definition. Present value: P = F(I + i)". yi ‘Compound discount factor = (I+ iy". ample. What is the present valueof $2,500 payable 4 years from now at 8 percent compounded quarterly? : Scanned with CamScanner CAL AMON PMS AR = gy fh EAD ROEM SET 3 ee! ww epvendedsraaecally dat 4 $4.00031 12 percent copoaled met, din 3 yeas, Y 8.002 Wpemene € Anagcount bearing intrest at 6 percent compounded seimannuslly was estabiched 10 years ago. The a¢- countbotance row is $9,030.55. What was the inital amount when the 2¢count was established? 4. Fing the preseat valve of $1,000 due in 2 years at ~~ § percent compounded daily. (Use 365 days in a yen. Th Find the present value of $2,000 due in 10 years at 9 percent comptended mon w "Roath coretr rogram Seton 6 11 for Prob compute any onc of the four parameters F, Pi, lei? and n, given the ether three. jy de conpter poptnin Poem Itaot ia the program i (a) for Problems 3 though Set 6-2 (Section 6.10) so tha it will Le Because of lack of comparcbility, itis hard to judge whether interest quoted at 8 6.13 EFFECTIVE percent compounded semiannually results in more or less interest than would be RATE: COMPOUND the case ifthe rate was 7.9 percent compounded monthly. To make the comparison INTEREST possible, we change bath to ther equivalent annual rates; these equivalents are called effective rates as in Section 6.5. For example, $1 at 8 percent compounded ” ‘quarterly for one year would amount to 0.08\* 1 ( le *) i = (1.02) = 108245216, hich isthe same as the amount of SI ata rate of 0.08243, or 8.243 percent for oe yea. Similarly, by calulator, $1 a 7.9 perceat compounded monthly for one ‘year would amount to oom? Fel ( + @) 5 = 1.081924169, ‘ Scanned with CamScanner we Ae TO PROWL SETS a Semeur es ase ae Problem Set 5-3 tp Ie) = In? nating) = In? Ine = tn? ant (a) = anti (a2) x02 1 beg) = log 3 tog slog 10) = log 3 log x = log 3 antilogtog 2) = anilogtlog 3) ash 1 ons. 1 san. 1 4. L 4 & as 18. 11.29, 1 t 8 ism. 1h 6.116 3.300 0.19870 or 14.8708, 1. 0.33, VW. 0.20112 or 20.1128, 10. 0.990. 19. 0.085. WL 0380. m 0202, re wa wei sal ee ae CHAPTER § Frten Se 61 1 ass 5535. Ras wy Sio. Lass. » sis 4 nse » 2.00. So asr. psi £ ase. $590 1 95x. Dn bys. by so. £9560 b $8.00. Rare 9 $0 RO isseets. AL 20 nents we. 4 AL isn. Th p7s%. AL 83. aun, At en. AE 95420. AT 098." 2. 4634%, AT $869.57. 18°. 9.651%. 2B sie. B. 19.3558, $455.25. % sgn. B sins. 3. taazr, Be, 2 nage. Problem Set 6-2 1. ssn, 9. 20.490 yeas. 2 ssy725, WO. 7.273 yeas. 2 sons, We 356% 4 $1319.32. Th 248%." : 5 ss. TB S6as1.t4 & ss10. = MK 20129. 1. 24061 15, 8.08 yeas. & s4s010. 16 174608. Scanned with CamScanner prilen Set 63 i & sin73i. : ee 1.78383 ns pe ibsichow, 4 3069.7. B $5,000. 4 97800 9, $8526 5 ss. 10 suiss7. Problem Se 64 1 425%. ee 2 10258. 1, 19.502. 1 126898. | 9.008. 4, 169868. 4 9.381%. 5 nan. W. 9.468. MW; 1.309%; 11.46; M1572 U.CO0; 11.6155; 166%. . WL. 14; 190; M750; 14.9 1.981%; 15.0065; 15.00%. Problem Set 6-5 1 sia, We ots, ‘ 2 sun 15. 008. 1 S7.16665. 1 00s. 4. ssoi97. V. si9.so97. 5. SLM. Tk $4317.01. & sss 1, $31,267.48, 1. 9093. sare. 4 gyar, 11, About $2,598,119,706. 4 00st DL $5.49. Te 0.062, 8.220%. 1. om. 1A 79008. 1 oom 5 S108. 1 oun. Problem Set 66 1. s.s38.44, 7, $4828.51, 2D ssos01.98, $1,576.44. A ssings, "$6902.95 A 5396.506 68 Ta $687.30. S. saa. VL, $31228231 & same TL ssogsé.a ANSWERS Tornoe ses my Prot Sel 6-7 1 654057, 4 s3781656, 1 swtonsi.. 4 $15,016.30, 5. 3) $6000.) $5287.67, & 9) $53,373.88. srasom0 1 0. Veo & soe. & > a) $10,158.49, +) $6,000 forintres; $4,758.49 reduction of balance owed «) $5,718 49 forinterest $5 04 het fac ed. Wa) $3540, ‘b) $120 interest; $115.40 seduction of balance owed. 6) $117.69 inter 17.71 reduction of balance owed. We a) $12,587:95. ‘b) $11,250 interest; $1,337.95 reduction of balance owed. TWA a) $275.35. - ‘b) $255.21 interest; $20.14 reduction of balance owed, TA $86,126.35. 1. $200,481 Problem Set 6-8 1. $1,146.39 M. $3,252.28. 2 sms. Th 82261 2. suyov020, 1B saa, 4. ss00.0 1 snow. 5. $2.8 16 s10,i986. “& saa. 16 S99256.11, Te 38,857. TW. Sta. A sim860. 1 sunset, 4. $607434. W. srastas, 10. sits.st386. Problem Set 6-9 1. 62818. W. sagas: 1 6guy. Ih sit. 110888. 1h sis. 4 se. 1 24.2817. 5. 10,533. 15 515550. & msil4o. We $16.6 1, 7515833. 7. SAT, tf gsscorm SIO 4. $1338.92 1 sail ML sos m. 2n3. Scanned with CamScanner

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