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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

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    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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