Compound Interest and Answer

Name________________________________ UDC – Quantitative Reasoning I EXAMINATION 3 – Personal Finance – Exponential Functions Fall – 2012 Instructions: This exam is worth 100 points. Read each question carefully. Answer each question clearly and concisely. Please, show All of Your Work. Remember, I do not believe in magic!!! A) B) Answer C) D) 1. What is the simple interest for a principal of $620 invested at a rate of 7% for 3 years? $173. 60 $130. 20 $172. 60 $129. 20 A) B) C) Answer D) E) 2. If you borrow $1100 for 5 years at 14% annual simple interest, how much must you repay at the end of the 5 years? 770. 00 $2215. 13 $2117. 96 $77,000 $1870. 00 A)Answer B) C) D) 3. How much interest is earned in 5 years on $2,900 deposited in an account paying 7. 1% interest, compounded quarterly? $1,223. 07 $1,186. 44 $266. 68 $1,029. 50 A)Answer B) C) D) E) 4. Suppose Emily Yu deposited $1300 in an account that earned simple interest at an annual rate of 8% and left it there for 4 years. At the end of the 4 years, Emily deposited the entire amount from that account into a new account that earned 8% compounded quarterly. She left the money in this account for 4 years. How much did she have after the 8 years? $2355. 0 $2427. 96 $3233. 87 $2457. 65 $4850. 81 A) B) C) Answer D) 5. If $1,390 is invested in an account which earns 9% interest compounded annually, which will be the balance of the account at the end of 14 years? $11,106,193 $3141 $4645 $21,211 A) B) C) Answer D) 6. Susan bought a 6-month $1100 certificate of deposit. At the end of 6 months, she received $99 simple interest. Find the annual rate of simple interest paid. 18% 16% 15. 0% 9% A) B) Answer C) 7. What lump sum should be deposited in an account that will earn at an annual rate of 8%, compounded quarterly, to grow to $140,000 for retirement in 15 years? 137,052. 73 $42,335. 45 $24,137. 93 D) E) $63,636. 36 $42,669. 52 A) B) C) D) Answer E) 8. How much money should be invested in an account that earns 6% interest, compounded quarterly, in order to have $7,000 in 5 years? Round to the nearest cent. $5,230. 81 $5,384. 62 $9,427. 99 $5,197. 29 $5,189. 61 A) B) Answer C) D) 10. 9. Suppose $500 is placed in an account that earns 8% interest compounded daily. Find the value of the investment after 5 years. Use the compound interest formula EMBED Equation.

BREE4, where P is the amount deposited, A is the value of the money after t years, r is the annual interest rate as a decimal, and n is the number of compounding periods per year. $731. 43 $745. 88 $792. 54 $811. 76 Suppose $5000 is placed in an account that earns 2% annual interest compounded quarterly. What is the value of the investment after 7 years? Use the compound interest formula EMBED Equation. BREE4, where P is the amount deposited, A is the value of the money after t years, r is the annual interest rate as a decimal, and n is the number of compounding periods per year. $5,749. 36 $5,552. 10 $6,320. 84 A) Answer B) C) D) $35,705. 27