Mathematics of Finance
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Find the simple interest
1) $4902 at 9.5% for 11 months
Find the amount of interest earned
2) $3954 at 8% compounded annually for 12 years
Find the present value
3) $17,650 in 4 years, 8% compounded quarterly
Find the future value
4) $500 deposited at the end of each 6-month period for 8 years; money earns 6% compounded semiannually
Find the amount of the payment necessary to amortize the loan.
5) $80,000; 8% compounded annually; 9 annual payments
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Solution Summary
This solution is comprised of a detailed explanation and calculation to find the simple interest, present value, future value, and amortization amount.
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Find the simple interest
1) $4902 at 9.5% for 11 months
4,902 x 0.095 x 11/12 = 426.88
Find the amount of interest earned
2) $3954 at 8% compounded annually for 12 years
FV = PV (1+R)N where PV is the present value
R is the interest rate
N is the period
FV = 3,954(1.08)12
= 3,954(2.5182)
= 9,956.96
Interest earned = 9,956.96 - 3,954 = 6,002.96
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