# simple interest

3. How long will it take \$2000 invested at 6.5% simple interest to grow to \$2500? 5. Write the next three terms of the sequence: a. 4, 8, 12, … b. 2, 6, 18, … 3. Parents want to have \$100,000 saved for their child’s education 18 years from now. How much must be invested today if they can earn: a. 8% simple interest? b. 8% compounded annually? c. 8% compounded quarterly? d. 8% compounded continuously? 5. Jane made a \$5,000 investment in a mutual fund. Two years later, the value was \$5,950. What rate, compounded annually, was earned on the investment? Show 5 decimal places. 2. How much money must be deposited at the beginning of each month into an account earning 8% compounded monthly in order to have \$5,000 in 3 years? 4. A worker deposits \$400 at the end of each month for 20 years into an IRA earning 8% compounded monthly. a. How much will be in the account after 20 years? 2. A driver involved in a car accident receives a settlement from the insurance company that guarantees to pay the driver \$10,000 at the end of each year for the next 5 years. The driver would like to collect all his money now rather than waiting for the annual payments. If the company offers a rate of 4% compounded annually, what lump sum can the driver collect upfront? 3. A salesman receives a \$25,000 bonus, and he purchases a deferred annuity earning 9% compounded monthly. How much can he collect at the end of each month for 5 years after deferring the annuity for 10 years. 6.5. Consider a car loan of \$28,000 repaid monthly over 5 years at 7 ½ % compounded monthly. a. Compute the monthly payment amount b. Complete the first two lines of the amortization table Month Payment Interest Payment Balance Reduction Unpaid Balance \$28,000 1 2 c. Find the total of all the payments for the full 5 years. Total paid=(payment amt)*(total # of payments) d. How much total interest would be paid over the full 5 years? Interest paid = total paid – amt borrowed e. Use the Unpaid Balance Formula to find the unpaid balance of the car loan after 2 years 3. How long will it take \$2000 invested at 6.5% simple interest to grow to \$2500? 5. Write the next three terms of the sequence: a. 4, 8, 12, … b. 2, 6, 18, … 3. Parents want to have \$100,000 saved for their child’s education 18 years from now. How much must be invested today if they can earn: a. 8% simple interest? b. 8% compounded annually? c. 8% compounded quarterly? d. 8% compounded continuously? 5. Jane made a \$5,000 investment in a mutual fund. Two years later, the value was \$5,950. What rate, compounded annually, was earned on the investment? Show 5 decimal places. 2. How much money must be deposited at the beginning of each month into an account earning 8% compounded monthly in order to have \$5,000 in 3 years? 4. A worker deposits \$400 at the end of each month for 20 years into an IRA earning 8% compounded monthly. a. How much will be in the account after 20 years? 2. A driver involved in a car accident receives a settlement from the insurance company that guarantees to pay the driver \$10,000 at the end of each year for the next 5 years. The driver would like to collect all his money now rather than waiting for the annual payments. If the company offers a rate of 4% compounded annually, what lump sum can the driver collect upfront? 3. A salesman receives a \$25,000 bonus, and he purchases a deferred annuity earning 9% compounded monthly. How much can he collect at the end of each month for 5 years after deferring the annuity for 10 years. 6.5. Consider a car loan of \$28,000 repaid monthly over 5 years at 7 ½ % compounded monthly. a. Compute the monthly payment amount b. Complete the first two lines of the amortization table Month Payment Interest Payment Balance Reduction Unpaid Balance \$28,000 1 2 c. Find the total of all the payments for the full 5 years. Total paid=(payment amt)*(total # of payments) d. How much total interest would be paid over the full 5 years? Interest paid = total paid – amt borrowed e. Use the Unpaid Balance Formula to find the unpaid balance of the car loan after 2 years
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