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Gracie Shay wants to buy a new Hummer in five years. Gracie estimates the cost of the Hummer will be $28,000.
If she invests $12,000 now at a rate of 6% compounded semiannually, she:
Will have $16,126.80
 
Lisa Richter deposited $5,000 at 4% compounded semiannually for three years.
At the beginning of the fourth year, Lisa deposited $2,500.
What would her balance be at the end of five years assuming she is still earning 4% compounded semiannually?
$8,800.99
 
Jane is having difficulty deciding whether to put her savings in the Mystic Bank or in the Four Rivers Bank.
Mystic offers a 12% rate compounded quarterly, and Four Rivers offers 14% compounded semiannually.
Jane has $40,000 to invest and expects to withdraw the money at the end of five years.
(Use the tables in the handbook.) The best deal is:
Four Rivers
 
Jim Moore opens a new savings account. He deposits $12,000 at 12% compounded semiannually.
At the start of the fourth year, Jim deposits an additional $50,000 that is also compounded semiannually
at 12%. At the end of six years, the balance in Jim Moore's account is (use the tables in the handbook):
$66,081.20
$50,000.00
$16,081.20
$88,555.42
None of these
 
Compounding:
Calculates interest periodically
 
In tables for calculating compound interest, the number of periods is equal to:
Number of years × number of times compounded per year
 
Merle Fonda opened a new savings account. She deposited $40,000 at 10% compounded semiannually.
At the start of the fourth year, Merle deposits an additional $20,000 that is also compounded semiannually at 10%.
At the end of six years, the balance in Merle's account is (use the tables in the handbook):
$98,636.72
 
The interest on $6,000 at 6% compounded semiannually for eight years is (use table in the handbook):
$3,628.20
 
Ellen deposits $6,773 into an account earning 1% annually.
After seven years what will Ellen's balance have grown to, including interest?
$7,261.33
 
Sam Monte deposits $21,500 into Legal Bank, which pays 6% interest that is compounded semiannually.
Using the table in the handbook, what will Sam have in his account at the end of six years?
$30,654.70
 
The rate used in the table for calculating compound interest is found by:
Annual rate divided by number of times compounded per year
 
Anne Katz, the owner of Katz Sport Shop, lends $8,000 to Shelley Slater to help her open an art shop.
Shelley plans to repay Anne at the end of eight years with interest compounded semiannually at 8%.
At the end of eight years, Anne will receive (use the tables in the handbook):
$14,984
 
Interest on $2,630 at 3% compounded annually for five years is:
$418.96
 
Earl Miller deposited $25,000 at Y Bank at an interest rate of 12% compounded quarterly. (Use the tables in the handbook.) The effective rate (APY) is:
12.55%
 
Using the table in your handbook, $6,000 for six years at 8½% compounded daily will grow to:
$9,991.20
 
$100,000 for 20 years compounded at 4% annually results in a rate per period of:
4%
 
Katie Hector wants to purchase a condo in Oxford, MS, in 20 years.
The cost of the condo is expected to be $180,000. Assuming she can earn 6% annually,
what should Katie deposit today?
$56,124
 

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Trisha Long wants to buy a boat in five years. She estimates the boat will cost $15,000 at that time.
What must Trisha deposit today in an account earning 5% annually to have enough to buy the boat in five years?
$11,752.50
 
$20,000 for 14 years compounded at 8% semiannually results in how many periods?
28
 
Using the table in the handbook, the present value of $12,000 for six years compounded at 6% semiannually is:
$8,416.80
 
Compounding is when interest is earned on:
the principal and prior periods' interest
 
Compounding goes from ______________ value to ______________.
present value to future value.
 
What is the equation to calculate simple interest?
Principal x Rate x Time
 
What is the equation to calculate compound interest?
Principle x Table Factor
 
The _________________________ law forced savings institutions to reveal their actual rate of interest.
Truth in Savings
 
What is the equation to calculate Effective Rate (AKA Annual Percentage Yield)?
Interest for 1 year/Principal = APY
 
Compounding looks at what $1 today will be in the __________.
future
 
When interest is compounded semiannually, interest is calculated how
many times per year?
2
 
You compound $1 for 3 years at 4% interest. Match the number of periods to the respective compounding periods.
3 -- Annual
6 -- Semiannual
12 -- Quarterly
36 -- Monthly
 
$1 is compounded semiannually for 10 years at 8% interest.
What is the interest rate per period?
8% ÷ 2 (semiannual) =
4%.
 
Compound interest results in _______________ interest over time than simple interest.
higher or Greater
 
Using the Rule of 72, how many years will it take to double your investment at 12% per year?
6
72 ÷ 12 = 6 years
 
Feliz borrowed $2,000 for 5 years at 6%. Using the simple interest formula, how much will he need to pay at the end of the loan?
$2,600
 
Cheng deposited $800 in a savings account for 4 years with a 6% annual compounding rate.
Match the compounding year to the interest earned.
Year 1 -- $48.00
Year 2 -- $50.88
Year 3 -- $53.93
 
$1 is compounded semiannually for 5 years at 2% interest. How many periods will this result in?
10 periods.
 
You compound $1 for 3 years at 12% interest.
Match the interest rate for each period to the respective compounding periods.
1% -- Monthly
3% -- Quarterly
6% -- Semiannual
12% -- Annual
 
Using the Rule of 72, how many years will it take to double your
investment at 12% per year?
72 ÷ 12 =
6 years
 
True or false: The APY (annual percentage yield) is different from the effective rate.
False
 
Jose invested $50,000 at 12% for 4 years compounded annually.
What is the maturity value at the end of Year 3?
$70,246.40
 
$1 is compounded annually for 3 years at 24% interest. What is the interest rate per period?
24%.
 
Wright invested $500 at 7% compounded daily for 6 years. What is the future value of his investment?
$760.95
 
Present value starts with what an item is worth in the __________ and calculates what that item is worth in the __________.
Future; Present
 
True or false: The APY (annual percentage yield) is different from the effective rate.
False
 
True or false: You can use the present value tables to check your work by reversing the future value table
True
 
Present value table factors are numbers (more/less) than 1.
Less
 
Effective rate (APY) is:
Interest for one year divided by principle
 
$100,000 for 20 years compounded at 4% annually results in a rate per period of:
4%
 
Using the table in your handbook, $6,000 for six years at 8½% compounded daily will grow to:
$9,991.20
 
Al Miler, the owner of Al's Garage, estimates that he will need $29,000 for new equipment in 15 years.
Al decides that he will put aside the money now so that in 15 years the $29,000 will be available.
His bank offers him 10% interest compounded semiannually. (Use the tables in the handbook.)
Al must invest today:
$6,710.60
 
Compounding:
Calculates interest periodically
 
A table factor of .7312 from a present value table of $1 means that a certain rate of interest for a certain period of time will equal:
$1
 
Using the table in handbook, the value of $60 deposited in a bank for six years at a rate of 10% compounded annually is:
$106.30
 
The rate used in the table for calculating compound interest is found by:
Annual rate divided by number of times compounded per year
 
$20,000 for 14 years compounded at 8% semiannually results in how many periods?
28
 
Effective rate (APY) is:
Interest for one year divided by principle
 
$100,000 for 20 years compounded at 4% annually results in a rate per period of:
4%
 
Using the table in your handbook, $6,000 for six years at 8½% compounded daily will grow to:
$9,991.20
 
Jane is having difficulty deciding whether to put her savings in the Mystic Bank or in the Four Rivers Bank. Mystic offers a 12% rate compounded quarterly, and Four Rivers offers 14% compounded semiannually. Jane has $40,000 to invest and expects to withdraw the money at the end of five years. (Use the tables in the handbook.) The best deal is:
Four Rivers
 
Al Miler, the owner of Al's Garage, estimates that he will need $29,000 for new equipment in 15 years. Al decides that he will put aside the money now so that in 15 years the $29,000 will be available. His bank offers him 10% interest compounded semiannually. (Use the tables in the handbook.) Al must invest today:
$6,710.60
 
Compounding:
Calculates interest periodically.
 
A table factor of .7312 from a present value table of $1 means that a certain rate of interest for a certain period of time will equal:
$1
 
Using the table in handbook, the value of $60 deposited in a bank for six years at a rate of 10% compounded annually is:
$106.30
 
The rate used in the table for calculating compound interest is found by:
Annual rate divided by number of times compounded per year
 
$20,000 for 14 years compounded at 8% semiannually results in how many periods?
28

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