Bsed3b Zamora, Cherry Final Exam-Math 18

University of Antique
College of Teacher Education

Bachelor of Secondary Education
Sibalom, Antique
MATH 18 Mathematics of Investment
CHERRY ANN M. ZAMORA

BSED MATHEMATICS
Check your progress 2

Calculate the compound amount when $4000 is deposited in an account earning 6% interest, compounded
monthly, for 2 years.
Solution: Use the compound amount formula.
P=4000 , r=6 %∨0.06 ,n=12 ,t=2

nt
r
( )
A=P 1+
n
12• 2
0.06
A=4000 1+( 12 )
A=4000 ( 1+0.005 )24
24
A=4000 ( 1.005 )
A=4000(1.127160)
A=4508.64
The compound amount after 2 years is approximately $4508.64
1
Sibalom, Antique

BSED MATHEMATICS

Calculate the future value of $2500 earning 9% interest, compounded daily, for 4 years.
P=2500 , r =9 %∨0.09 , n=360 , t=4

nt
r
A=P 1+( ) n
360• 4
0.09
A=2500 1+( 360 )
1440
A=2500 (1+ 0.00025 )
A=2500 (1.00025 )1440
A=2500(1.4332649)
A=3583.16
The future amount after 4 years is approximately $3583.16

How much interest is earned in 6 years on $8000 deposited in an account paying 9% interest,
compounded monthly?
2
Sibalom, Antique

BSED MATHEMATICS
P=8000 ,r =9 %∨0.09 , n=12 , t =6

nt
r
A=P 1+( ) n
12 •6
0.09
A=8000 1+ ( 12 )
A=8000 ( 1+ 0.0075 )72
72
A=8000 ( 1.0075 )
A=8000(1.7125527)
A=13,700.42
I = A−P
I =13,700.42−8000
I =5700.42
The amount of interest earned is approximately $5700.42
3
Sibalom, Antique

BSED MATHEMATICS
Determine the compound amount when $3500 is deposited in an account earning an interest rate of 6%,
compounded semiannually, for 5 years.
P=3500 , r =6 %∨0.6 , n=2, t=5

nt
r
( )
A=P 1+
n
2 •5
0.06
A=3500 1+( 2 )
A=3500 (1+ 0.03 )10
10
A=3500 (1.03 )
A=3500(1.343916379)
A=4703.707328∨4703.71
The compound amount after 5 years is approximately $4703.71
4
Sibalom, Antique

BSED MATHEMATICS

How much money should be invested in an account that earns 9% interest, compounded semiannually, in
order to have $20,000 in 5 years?
Solution: Use the present value formula.
A=20,000 ,r =9 %∨0.09 , n=2, t=5
A
P= nt
r
( ) 1+
n
20,000
P=
0.09 2• 5
( 1+
2 )
20,000
P=
( 1+0.045 )10
20,000
P=
1.552969
P=12,878.55
$12,878.55should be invested in the account.
5
Sibalom, Antique

BSED MATHEMATICS

Use the finance feature of a calculator to determine how much money should be invested in an account
that earns 6% interest, compounded daily, in order to have $25,000 in 15 years.
A=25,000 ,r =6 %∨0.06 , n=360 ,t=15
A
P= nt
r
( ) 1+
n
25,000
P=
0.06 360• 15
( 1+
360 )
25,000
P=
( 1+0.00016666 )5400
25,000
P=
( 1.00016666 )5400
25,000
P=
2.459418668
P=10,165.00376∨10,165.00
$10,165.00should be invested in the account.
6
Sibalom, Antique

BSED MATHEMATICS
Assume that the average new car sticker price in 2013 is $28,000. Use an annual inflation rate of 5% to
estimate the average new car sticker price in 2030.
P=28 ,000 , r=5 %∨0.05 ,n=1 ,t=17

nt
r
A=P 1+( )
n
1 •17
0.05
A=28,000 1+( 1 )
17
A=28,000 (1+ 0.05 )
A=28,000 (1.05 )17
A=28,000(2.2920183)
A=64,176.51
The average new car sticker price in 2030 will be approximately $ 64,176.51

7
Sibalom, Antique

BSED MATHEMATICS
Suppose you purchase an insurance policy in 2015 that will provide you with $500,000 when you retire in
4o years. Assuming an annual inflation rate of 7%, what will be the purchasing power of half a million
dollars in 2055?
A=500,000 ,r =7 %∨0.07 , n=1, t=40
A
P= nt
r
( ) 1+
n
500,000
P=
0.07 1 •40
( 1+
1 )
500,000
P=
( 1+0.07 )40
500,000
P=
14.9744578
P=33,390.19
In 2055, the purchasing power of $500,000 will be approximately $33,390.19.
8
Sibalom, Antique

BSED MATHEMATICS
A bank offers a certificate of deposit at an annual interest rate of 4%, compounded quarterly. Find the
effective rate. Round to the nearest hundredth of a percent.
P=100 , r =4 %∨0.04 , n=4 , t=1

nt
r
A=P 1+( ) n
4 •1
0.04
A=100 1+ ( 4 )
4
A=100 (1+0.01 )
A=100 (1.01 ) 4
A=100(1.040604)
A=104.06
I = A−P
I =104.06−100
I =4.06
The effective interest rate is 4.06%.
9
Sibalom, Antique

BSED MATHEMATICS

Which investment has the higher annual yield, one that earns 5% compounded quarterly or one that earns
5.25% compounded semiannually?
nt 4 •1
r 0.05
( ) (
1+
n
= 1+
4 ) =1.050945
nt 2• 1
r 0.0525
( ) (
1+
n
= 1+
2 ) =1.053189
An investment of 5.25% compounded semiannually has a higher annual yield than an investment that
earns 5% compounded quarterly.
10

Bsed3b Zamora, Cherry Final Exam-Math 18

Uploaded by

Copyright:

Available Formats

Bsed3b Zamora, Cherry Final Exam-Math 18

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Bsed3b Zamora, Cherry Final Exam-Math 18

Uploaded by

Copyright:

Available Formats

University of Antique

College of Teacher Education

MATH 18 Mathematics of Investment

CHERRY ANN M. ZAMORA

Check your progress 2

Solution: Use the compound amount formula.

P=4000 , r=6 %∨0.06 ,n=12 ,t=2

The compound amount after 2 years is approximately $4508.64

MATH 18 Mathematics of Investment

CHERRY ANN M. ZAMORA

Check your progress 3

Solution: Use the compound amount formula.

P=2500 , r =9 %∨0.09 , n=360 , t=4

A=2500 (1.00025 )1440

The future amount after 4 years is approximately $3583.16

Check your progress 4

MATH 18 Mathematics of Investment

CHERRY ANN M. ZAMORA

Solution: Use the compound amount formula.

P=8000 ,r =9 %∨0.09 , n=12 , t =6

The amount of interest earned is approximately $5700.42

Check your progress 5

MATH 18 Mathematics of Investment

CHERRY ANN M. ZAMORA

Solution: Use the compound amount formula.

P=3500 , r =6 %∨0.6 , n=2, t=5

The compound amount after 5 years is approximately $4703.71

MATH 18 Mathematics of Investment

CHERRY ANN M. ZAMORA

Check your progress 6

Solution: Use the present value formula.

A=20,000 ,r =9 %∨0.09 , n=2, t=5

$12,878.55should be invested in the account.

MATH 18 Mathematics of Investment

CHERRY ANN M. ZAMORA

Check your progress 7

Solution: Use the present value formula.

A=25,000 ,r =6 %∨0.06 , n=360 ,t=15

$10,165.00should be invested in the account.

Check your progress 8

MATH 18 Mathematics of Investment

CHERRY ANN M. ZAMORA

Solution: Use the compound amount formula.

P=28 ,000 , r=5 %∨0.05 ,n=1 ,t=17

A=28,000 (1.05 )17

Check your progress 9

MATH 18 Mathematics of Investment

CHERRY ANN M. ZAMORA

Solution: Use the present value formula.

A=500,000 ,r =7 %∨0.07 , n=1, t=40

In 2055, the purchasing power of $500,000 will be approximately $33,390.19.

Check your progress 10

MATH 18 Mathematics of Investment

CHERRY ANN M. ZAMORA

Solution: Use the compound amount formula.

P=100 , r =4 %∨0.04 , n=4 , t=1

The effective interest rate is 4.06%.

MATH 18 Mathematics of Investment

CHERRY ANN M. ZAMORA