Compound Interest
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5-1B. (Compound interest) To what amount will the following investments accumulate?
a. $4,000 invested for 11 years at 9 percent compounded annually
b. $8,000 invested for 10 years at 8 percent compounded annually
c. $800 invested for 12 years at 12 percent compounded annually
d. $21,000 invested for 6 years at 5 percent compounded annually
5-2B. (Compound value solving for n) How many years will the following take?
a. $550 to grow to $1,043.90 if invested at 6 percent compounded annually
b. $40 to grow to $88.44 if invested at 12 percent compounded annually
c. $110 to grow to $614.79 if invested at 24 percent compounded annually
d. $60 to grow to $78.30 if invested at 3 percent compounded annually
5-3B. (Compound value solving for i) At what annual rate would the following have to be invested?
a. $550 to grow to $1,898.60 in 13 years
b. $275 to grow to $406.18 in 8 years
c. $60 to grow to $279.66 in 20 years
d. $180 to grow to $486.00 in 6 years
5-4B. (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. $400 to be received 6 years from now discounted back to the present at 6 percent
c. $1,000 to be received 8 years from now discounted back to the present at 5 percent
d. $900 to be received 9 years from now discounted back to the present at 20 percent
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Compound Interest
5-1B. (Compound interest) To what amount will the following investments accumulate?
a. $4,000 invested for 11 years at 9 percent compounded annually
FV = PV(1 + r)n where PV is the present value
FV is the future value
r is the discount rate
n is the period
FV = 4,000(1 + 0.09)11
FV = 10,321.71
b. $8,000 invested for 10 years at 8 percent compounded annually
Then you can replace the information into the formula to find the answer.
FV = 17,271.40
c. ...
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