FINANCE QUESTIONS [87 marks]

1a. On 1st January 2020, Laurie invests $P in an account that pays a nominal annual interest rate of 5.5 %, compounded quarterly. [3 marks]

The amount of money in Laurie’s account at the end of each year follows a geometric sequence with common ratio, r.

Find the value of r, giving your answer to four significant figures.

1b. Laurie makes no further deposits to or withdrawals from the account. [3 marks]

Find the year in which the amount of money in Laurie’s account will become double the amount she invested.

2a. Helen and Jane both commence new jobs each starting on an annual salary of $70, 000. At the start of each new year, Helen [2 marks]

receives an annual salary increase of $2400.

Let $Hn represent Helen’s annual salary at the start of her nth year of employment.

Show that Hn = 2400n + 67 600 .

2b. At the start of each new year, Jane receives an annual salary increase of 3% of her previous year’s annual salary. [1 mark]

n−1
Jane’s annual salary, $Jn , at the start of her nth year of employment is given by Jn = 70 000(1. 03) .

Given that Jn follows a geometric sequence, state the value of the common ratio, r.

2c. At the start of year N , Jane’s annual salary exceeds Helen’s annual salary for the first time. [3 marks]

Find the value of N .

2d. For the value of N found in part (c) (i), state Helen’s annual salary and Jane’s annual salary, correct to the nearest dollar. [2 marks]

2e. Find Jane’s total earnings at the start of her 10th year of employment. Give your answer correct to the nearest dollar. [4 marks]
3a. Two friends Amelia and Bill, each set themselves a target of saving $20 000 . They each have $9000 to invest. [3 marks]

Amelia invests her $9000 in an account that offers an interest rate of 7% per annum compounded annually.

Find the value of Amelia’s investment after 5 years to the nearest hundred dollars.

3b. Determine the number of years required for Amelia’s investment to reach the target. [2 marks]
3c. Bill invests his $9000 in an account that offers an interest rate of r% per annum compounded monthly, where r is set to two [3 marks]

decimal places.

Find the minimum value of r needed for Bill to reach the target after 10 years.
3d. A third friend Chris also wants to reach the $20 000 target. He puts his money in a safe where he does not earn any interest. His [5 marks]

system is to add more money to this safe each year. Each year he will add half the amount added in the previous year.

Show that Chris will never reach the target if his initial deposit is $9000.

3e. Find the amount Chris needs to deposit initially in order to reach the target after 5 years. Give your answer to the nearest dollar. [3 marks]
4a. Give your answers in this question correct to the nearest whole number. [3 marks]

Imon invested 25 000 Singapore dollars (SGD) in a fixed deposit account with a nominal annual interest rate of 3. 6%, compounded
monthly.

Calculate the value of Imon’s investment after 5 years.

4b. At the end of the 5 years, Imon withdrew x SGD from the fixed deposit account and reinvested this into a super-savings account [3 marks]

with a nominal annual interest rate of 5. 7%, compounded half-yearly.

The value of the super-savings account increased to 20 000 SGD after 18 months.

Find the value of x.

5a. Tommaso plans to compete in a regional bicycle race after he graduates, however he needs to buy a racing bicycle. He finds a [3 marks]

bicycle that costs 1100 euro (EUR). Tommaso has 950 EUR and invests this money in an account that pays 5 % interest per year,

compounded monthly.

Determine the amount that he will have in his account after 3 years. Give your answer correct to two decimal places.
5b. The cost of the bicycle, C , can be modelled by C = 20x + 1100 , where x is the number of years since Tommaso invested his [3 marks]

money.

Find the difference between the cost of the bicycle and the amount of money in Tommaso’s account after 3 years. Give your answer

correct to two decimal places.

5c. After m complete months Tommaso will, for the first time, have enough money in his account to buy the bicycle. [5 marks]

Find the value of m.

6a. In this question, give all answers to two decimal places. [3 marks]

Karl invests 1000 US dollars (USD) in an account that pays a nominal annual interest of 3.5%, compounded quarterly. He leaves the
money in the account for 5 years.

Calculate the amount of money he has in the account after 5 years.

6b. Write down the amount of interest he earned after 5 years. [1 mark]

6c. Karl decides to donate this interest to a charity in France. The charity receives 170 euros (EUR). The exchange rate is 1 USD = t [2 marks]

EUR.

Calculate the value of t.

7a. Juan buys a bicycle in a sale. He gets a discount of 30% off the original price and pays 560 US dollars (USD). [2 marks]

Calculate the original price of the bicycle.

7b. To buy the bicycle, Juan takes a loan of 560 USD for 6 months at a nominal annual interest rate of 75%, compounded monthly. [4 marks]

Juan believes that the total amount he will pay will be less than the original price of the bicycle.

Calculate the difference between the original price of the bicycle and the total amount Juan will pay.
8a. Phil takes out a bank loan of $150 000 to buy a house, at an annual interest rate of 3.5%. The interest is calculated at the end of [3 marks]

each year and added to the amount outstanding.

Find the amount Phil would owe the bank after 20 years. Give your answer to the nearest dollar.

8b. To pay off the loan, Phil makes annual deposits of $P at the end of every year in a savings account, paying an annual interest rate [3 marks]

of 2% . He makes his first deposit at the end of the first year after taking out the loan.

20
(1.02 −1)P
Show that the total value of Phil’s savings after 20 years is .
(1.02−1)
8c. Given that Phil’s aim is to own the house after 20 years, find the value for P to the nearest dollar. [3 marks]

8d. David visits a different bank and makes a single deposit of $Q , the annual interest rate being 2.8%. [3 marks]

David wishes to withdraw $5000 at the end of each year for a period of n years. Show that an expression for the minimum value of Q is

5000 5000 5000

1.028
+ 2
+ … +
1.028
n .
1.028

8e. Hence or otherwise, find the minimum value of Q that would permit David to withdraw annual amounts of $5000 indefinitely. Give [3 marks]

your answer to the nearest dollar.

9a. Jashanti is saving money to buy a car. The price of the car, in US Dollars (USD), can be modelled by the equation [1 mark]

t
P = 8500 (0.95) .

Jashanti’s savings, in USD, can be modelled by the equation

S = 400t + 2000.

In both equations t is the time in months since Jashanti started saving for the car.

Write down the amount of money Jashanti saves per month.

9b. Use your graphic display calculator to find how long it will take for Jashanti to have saved enough money to buy the car. [2 marks]
 9c. Jashanti does not want to wait too long and wants to buy the car two months after she started saving. She decides to ask her [3 marks]

parents for the extra money that she needs.

Calculate how much extra money Jashanti needs.

10. Carmen also deposited ARS in a bank account. Her account pays a nominal annual interest rate of 17%, compounded yearly. [3 marks]

After three years, the total amount in Carmen’s account is 10 000 ARS.

Find the amount that Carmen deposited in the bank account.

© International Baccalaureate Organization 2022

International Baccalaureate® - Baccalauréat International® - Bachillerato Internacional®
Terms and conditions (https://www.ibo.org/en/terms-and-conditions/) | Privacy policy (https://www.ibo.org/terms-and-conditions/privacy-
policy/)

Printed for USKUDAR AMER ACAD LIB