1. Simple Interest versus Compound Interest - First City Bank pays 8 percent simple interest on its savings account balances, whereas Second City Bank pays 8 percent interest compounded annually. If you made $5,000 deposit in each bank, how much more money would you earn from your Second City Bank account at the end of 10 years?
2. Calculating Future Values: Your coin collection contains fifty 1952 silver dollars. If your grandparents purchased them for their face value when they were new, how much will your collection be worth when you retire in 2057, assuming they appreciate at 4.5 percent annual rate?
3. Calculating Present Values - You have just received notification that you have won the $1 million first prize in the Centennial Lottery. However, the prize will be awarded on your 100th birthday (assuming you're around to collect), 80 years from now. What is the present value of your windfall if the appropriate discount rate is 10 percent?
The solution explains the calculation of simple and compound interest, present value and future value