Mathematics of Personal Finance Take Home Test
MCF3C Compound Interest Assignment
Name _____________________________
1. Martha invested $600 in an account earning 7% simple interest for 10 years. How much interest did Martha earn?
(5)
2. After 48 months, Jillian’s original investment of $4000 had earned her $250 in interest. What rate of simple interest did her investment earn?
(6)
3. Complete the charts and graphs for the following information. (10)
a) $3000 is invested at 10% simple interest for 8 years.
|Year |Start Amount |Interest |Total Amount |
| 0 |3000 |0 |3000 |
|1 |3000 |300 |3300 |
|2 |3300 | | |
|3 | | | |
|4 | | | |
|5 | | | |
|6 | | | |
|7 | | | |
|8 | | | |
b) On the grid above, construct a graph to display the total amount of the investment over 8 years.
c) $3000 is invested at 10% interest compounded annually for 8 years.
|Year |Principal |Interest |Total amount |
|0 |3000 |0 |3000 |
|1 |3000 |300 |3300 |
|2 |3300 | | |
|3 | | | |
|4 | | | |
|5 | | | |
|6 | | | |
|7 | | | |
|8 | | | |
d) On the grid above, construct a graph to display the total amount of the investment over 8 years.
e) Compare you two graphs. What do you notice about the way simple interest grows compared to compound interest?
Use the Compound Interest Formula
3. $4000 is invested at 6% compounded semi-annually for 8 years. How much will it be worth at the end of the term?
(5)
4. Sarah needs $25 000 for a down payment on a house in 2 years. How much does she have to invest today into an account that earns 12% compounded quarterly?
(5)
Use the TVM solver for Problem 5
5. Harold invests $800 at 6.7% compounded monthly. How much will his investment be worth in 10 years?
(5)
PV-
PMT-
FV-
Rate-
Periods-
Solve this page however you like.
6. If the interest rate and compounding frequency remain constant it always take the same amount of time for the principal to double.
a. Use examples to prove this is true. (4)
b. Use the compound interest formula to show why this makes sense. (2)
7. If Bobby invests $300 today at 2.8% compounded quarterly, how long will it take to reach $1000? (5)
-----------------------
y
8
4
8
5400
3400
3800
4200
4600
5000
0
6
3200
4000
4800
2
3600
5200
4400
3000
y
10
4
8
3000
3200
3600
4000
4400
4800
0
6
5000
3800
4600
2
3400
5000
4200
10
y
8
4
8
7000
3600
4400
5200
6000
6800
2
3000
4000
5600
0
3200
6400
4800
6
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