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# Compound Interest Review Questions

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5-1A. (Compound interest) To what amount will the following investments accumulate?
a. \$5,000 invested for 10 years at 10 percent compounded annually
b. \$8,000 invested for 7 years at 8 percent compounded annually
c. \$775 invested for 12 years at 12 percent compounded annually
d. \$21,000 invested for 5 years at 5 percent compounded annually
5-4A. (Present value) What is the present value of the following future amounts?
a. \$800 to be received 10 years from now discounted back to the present at 10 percent
b. \$300 to be received 5 years from now discounted back to the present at 5 percent
c. \$1,000 to be received 8 years from now discounted back to the present at 3 percent
d. \$1,000 to be received 8 years from now discounted back to the present at 20 percent

5-5A. (Compound annuity) What is the accumulated sum of each of the following streams of
payments?
a. \$500 a year for 10 years compounded annually at 5 percent
b. \$100 a year for 5 years compounded annually at 10 percent
c. \$35 a year for 7 years compounded annually at 7 percent
d. \$25 a year for 3 years compounded annually at 2 percent

5-6A. (Present value of an annuity) What is the present value of the following annuities?
a. \$2,500 a year for 10 years discounted back to the present at 7 percent
b. \$70 a year for 3 years discounted back to the present at 3 percent
c. \$280 a year for 7 years discounted back to the present at 6 percent
d. \$500 a year for 10 years discounted back to the present at 10 percent

#### Solution Summary

The solution examines compound and accumulate interest on investments. To what amount specific investments will be accumulated to is found.

\$2.19

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at 12% compounded quarterly?

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