Adv. Algebra, UNIT 3: Compound Interest Name: Date ...

[Pages:1]Adv. Algebra, UNIT 3: Compound Interest Name:____________________________________ Date:____

Compound Interest Formula:

Continuous Compound Interest Formula:

,you will also find on your calculator

1. Suppose Wes has $1000 that he invests in an account that pays 3.5% interest compounded quarterly. How much money does Wes have at the end of 5 years? How much interest will he earn?

2. William wants to have a total of $4000 in two years so that he can put a hot tub on his deck. He finds an account that pays 5% interest compounded monthly. How much should William put into this account so that he'll have $4000 at the end of two years?

3. Suppose William, from the last problem, only has $3500 to invest but still wants $4000 for a hot tub. He finds a bank offering 5.25% interest compounded quarterly. How long will he have to leave his money in the account to have $4000?

4. Suppose $5000 is put into an account that pays 4% compounded continuously. How much will be in the account after 3 years?

5. If interest is compounded continuously at 4.5% for 7 years, how much will a $2000 investment be worth at the end of 7 years?

6. How long will it take $3000 to double if it is invested in an account that pays 3% compounded continuously?

7. Congratulations!! You have just won $50,000! You decide to invest your money and the bank presents you with two investment options. You may either invest your $50,000 at 5% interest, compounded monthly, for a period of ten years OR you can invest that $50,000 at 5% interest, compounded continuously, for ten years. Which investment option will yield a greater profit?

8. ABC Bank is offering to double your money! They say that if you invest with them at 6% interest compounded quarterly they will double your money. If you invest $1500 in the account, how long will it take to double your money?

9. How long will it take $4000 to triple if it is invested at 5% compounded continuously?

10. Lindsay wants to have a total of $3500 in two years so she can take a trip to St. Maarten. She finds an account that pays 4% interest compounded monthly. How much should Lindsay put into this account so that she'll have $3500 at the end of two years?

11. Miss Young wants to have a total of $10,000 in two years so that she can travel around the world. Suppose she finds an account that pays 3.25% interest compounded continuously. How much should Miss Young put into this account so that she'll have $10,000 at the end of two years?

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