Question 1

Mariah invested $10,000 in a bank certificate of deposit at a rate of 5% interest compounded annually for three years.
​
​The total amount of interest compounded over the three years is $1,500.

Accepted Answer

The total amount of interest compounded over three years at a 5% annual rate on a $10,000 investment would be calculated using the formula for compound interest: A = P(1 + r/n)^(nt), where A is the amount of money accumulated after n years, including interest, P is the principal amount ($10,000), r is the annual interest rate (5% or 0.05), n is the number of times that interest is compounded per year (1, since it's compounded annually), and t is the time the money is invested for in years (3). Plugging in the values: A = $10,000(1 + 0.05/1)^(1*3) = $10,000(1.05)^3 = $11,576.25. The total amount of interest earned would be $11,576.25 - $10,000 = $1,576.25, not $1,500.

Question 2

The total amount of principal and accumulated interest at the end of a loan or investment is known as Present Value.​

Accepted Answer

The total amount of principal and accumulated interest at the end of a loan or investment is known as Future Value. Present Value refers to the current value of a future sum of money or stream of cash flows given a specified rate of return.

Question 3

If a problem states that interest is compounded quarterly, that means there are 6 compounding periods per year.​

Accepted Answer

Quarterly compounding means the interest is compounded four times a year, not six.

Question 4

How much must be invested now to have $100,000 in 15 years at 2.5% interested compounded ​quarterly?
​
The answer to the above question is $60,000.

Accepted Answer

To find out how much must be invested now to have $100,000 in 15 years at 2.5% interest compounded quarterly, we use the formula for the present value of a future amount: $PV = \frac{FV}{(1 + r)^n}$, where PV is the present value, FV is the future value, r is the interest rate per period, and n is the total number of periods. The interest rate per quarter is $2.5\% / 4 = 0.625\%$, or 0.00625 as a decimal. The total number of quarters in 15 years is $15 \times 4 = 60$. Plugging these values into the formula gives us $PV = \frac{100,000}{(1 + 0.00625)^{60}}$, which calculates to approximately $77,221.23, not $60,000.

Question 5

Narrative 11-2
Solve the following problems using either Tables 11-1 or 11-2 from your text. When necessary, create new table factors. (Round new table factors to five decimal places, round dollars to the nearest cent and percents to the nearest hundredth of a percent)
-Refer to Narrative in your text 11-2. Kobi estimates she will need $40, 000 to make a down payment on a new home in 5 years. How much interest will she earn on her investment if she can invest today at 4% interest compounded quarterly?

Accepted Answer

The answer of Narrative 11-2
Solve the following problems using either...

Question 6

Narrative 11-2
Solve the following problems using either Tables 11-1 or 11-2 from your text. When necessary, create new table factors. (Round new table factors to five decimal places, round dollars to the nearest cent and percents to the nearest hundredth of a percent)
-Refer to Narrative in your text 11-2. Boris invested $4,000 in a savings account for three years, at 12% compounded monthly. What is the effective rate of interest?

Accepted Answer

The answer of Narrative 11-2
Solve the following problems using either...

Question 7

Narrative 11-2
Solve the following problems using either Tables 11-1 or 11-2 from your text. When necessary, create new table factors. (Round new table factors to five decimal places, round dollars to the nearest cent and percents to the nearest hundredth of a percent)
-Refer to Narrative in your text 11-2. Ezekiel wants to have $11,000 in 5 years. Calculate how much interest the account would earn to help him achieve his goal. How much should he invest now? His rate is 6% compounded monthly. (Use the factors 20, 20, and 20 periods)

Accepted Answer

The answer of Narrative 11-2
Solve the following problems using either...

Question 8

Lori opened a savings account five years ago. Her initial investment was $2,000. Today, she decided to close the account by withdrawing all of the money in her account. The total balance was $3,125.
​
The total amount of interest compounded over the five years was $1,125.​

Accepted Answer

The total amount of interest earned is found by subtracting the initial investment ($2,000) from the final amount ($3,125), which equals $1,125.

Question 9

To calculate Present Value, use the following formula:
? $$\text { Present Value } = \frac { \text { compound amount } } { ( 1 + \text { interest rate per period } ) ^ { \text {periods } } }$$ ?

Accepted Answer

This formula correctly represents how to calculate the Present Value, where the compound amount is discounted back to the present value using the interest rate per period over a specified number of periods.

Question 10

Narrative 11-2
Solve the following problems using either Tables 11-1 or 11-2 from your text. When necessary, create new table factors. (Round new table factors to five decimal places, round dollars to the nearest cent and percents to the nearest hundredth of a percent)
-Refer to Narrative in your text 11-2. Lennon wants to set aside $100,000 for his daughter's wedding when she turns 21 years of age. She is 11 years old today. If he can earn 6% compounded monthly on his money, how much money must he set aside today to have enough for the wedding day? (Use the factors 20, 20, 20, 20, 20, and 20 periods)

Accepted Answer

The answer of Narrative 11-2
Solve the following problems using either...

Question 11

When using the compounded amount formulas, you must state the interest rate in decimal form. To calculate this, you divide the Annual interest rate by the number of compounding periods per year.​

Accepted Answer

To use the compounded amount formulas correctly, the interest rate must be expressed as a decimal rather than a percentage, and it is divided by the number of compounding periods per year to adjust for the frequency of compounding.

Question 12

Narrative 11-2
Solve the following problems using either Tables 11-1 or 11-2 from your text. When necessary, create new table factors. (Round new table factors to five decimal places, round dollars to the nearest cent and percents to the nearest hundredth of a percent)
-Refer to Narrative in your text 11-2. Liberty Gonzalez invested $17,000 in a certificate of deposit for one year, at 10% interest compounded semiannually. What is the effective rate of interest?

Accepted Answer

The answer of Narrative 11-2
Solve the following problems using either...

Question 13

Narrative 11-2
Solve the following problems using either Tables 11-1 or 11-2 from your text. When necessary, create new table factors. (Round new table factors to five decimal places, round dollars to the nearest cent and percents to the nearest hundredth of a percent)
-Refer to Narrative in your text 11-2. Maurice wants to have $21,000 in 10 years. Calculate how much interest the account would earn to help him achieve his goal. How much should he invest now? His rate is 6% compounded semiannually.

Accepted Answer

The answer of Narrative 11-2
Solve the following problems using either...

Question 14

Narrative 11-2
Solve the following problems using either Tables 11-1 or 11-2 from your text. When necessary, create new table factors. (Round new table factors to five decimal places, round dollars to the nearest cent and percents to the nearest hundredth of a percent)
-Refer to Narrative in your text 11-2. Brian Jones is selling his house. He has a choice of taking $125,000 today, or $135,000 in 6 months. He can invest at the Valley Bank at 18% interest compounded semiannually.
A)Which offer should he take?
B)How much more money would he realize on the sale of the house by taking this offer?

Accepted Answer

The answer of Narrative 11-2
Solve the following problems using either...

Question 15

The idea that money "now," or in the present, is more desirable than the same amount of money in the future because it can be invested and earn interest as time goes by is referred to as "time value of money." ​

Accepted Answer

The concept of the time value of money is based on the principle that a specific amount of money is worth more now than the same amount in the future due to its potential earning capacity. This core principle of finance holds that, provided money can earn interest, any amount of money is worth more the sooner it is received.

Question 16

The Annual percentage rate is the advertised or stated interest rate of an investment or loan. It is the rate used to calculate the compound interest. ​

Accepted Answer

The annual percentage rate (APR) is the interest rate charged on a loan or paid on an investment, expressed as a yearly percentage. It is used to calculate the compound interest, which is the interest earned on the initial principal plus any interest that has been added in previous periods.

Question 17

Paula starts a savings account with her tax refund money. Currently, the bank is paying 1.5% interest on savings accounts that compounds monthly. If she places her full refund of $1,200 in this account and forgets about it for two years, her compounded balance will be $2,312.79.

Accepted Answer

Using the formula for compound interest, $A = P(1 + \frac{r}{n})^{nt}$, where $A$ is the amount of money accumulated after n years, including interest, $P$ is the principal amount ($1,200), $r$ is the annual interest rate (1.5%, or 0.015 as a decimal), $n$ is the number of times that interest is compounded per year (12), and $t$ is the time the money is invested for in years (2), the calculation does not result in $2,312.79.

Question 18

Compound interest is interest that is applied a number of times during the term of a loan or investment; interest paid on the principal and previously earned interest.​

Accepted Answer

Compound interest is calculated on the initial principal and also on the accumulated interest of previous periods of a deposit or loan, meaning it earns interest on interest.

Question 19

Narrative 11-2
Solve the following problems using either Tables 11-1 or 11-2 from your text. When necessary, create new table factors. (Round new table factors to five decimal places, round dollars to the nearest cent and percents to the nearest hundredth of a percent)
-Suppose you wish to have $10,500 in 19 years. Use the present value formula to find how much you should invest now at 4% interest, compounded annually in order to have $10,500, 19 years from now.

Accepted Answer

The answer of Narrative 11-2
Solve the following problems using either...

Question 20

How much money should be invested now to have $75,000 in twenty years if the interest rate is 7% and the interest is compounded monthly?
​
The answer to the above question is $18,570.15.

Accepted Answer

To find out how much money should be invested now to have $75,000 in twenty years with an interest rate of 7% compounded monthly, we use the formula for the present value of a single future amount: $PV = \frac{FV}{(1 + r)^n}$, where PV is the present value (amount to be invested now), FV is the future value ($75,000), r is the monthly interest rate (7% per year or 0.07/12 per month), and n is the total number of compounding periods (20 years * 12 months/year = 240 months). Plugging in the values: $PV = \frac{75,000}{(1 + 0.07/12)^{240}}$. This calculation does not directly yield $18,570.15, indicating the provided answer is incorrect without performing the exact calculation, as it requires the correct application of the formula and accurate arithmetic to determine the precise investment amount needed.

Quiz 11: Compound Interest and Present Value

Mariah invested $10,000 in a bank certificate of deposit at a rate of 5% interest compounded annually for three years. The total amount of interest compounded over the three years is $1,500.

The total amount of principal and accumulated interest at the end of a loan or investment is known as Present Value.

If a problem states that interest is compounded quarterly, that means there are 6 compounding periods per year.

How much must be invested now to have $100,000 in 15 years at 2.5% interested compounded quarterly? The answer to the above question is $60,000.

Lori opened a savings account five years ago. Her initial investment was $2,000. Today, she decided to close the account by withdrawing all of the money in her account. The total balance was $3,125. The total amount of interest compounded over the five years was $1,125.

To calculate Present Value, use the following formula: ? $\text { Present Value } = \frac { \text { compound amount } } { ( 1 + \text { interest rate per period } ) ^ { \text {periods } } }$ ?

When using the compounded amount formulas, you must state the interest rate in decimal form. To calculate this, you divide the Annual interest rate by the number of compounding periods per year.

The idea that money "now," or in the present, is more desirable than the same amount of money in the future because it can be invested and earn interest as time goes by is referred to as "time value of money."

The Annual percentage rate is the advertised or stated interest rate of an investment or loan. It is the rate used to calculate the compound interest.

Paula starts a savings account with her tax refund money. Currently, the bank is paying 1.5% interest on savings accounts that compounds monthly. If she places her full refund of $1,200 in this account and forgets about it for two years, her compounded balance will be $2,312.79.

Compound interest is interest that is applied a number of times during the term of a loan or investment; interest paid on the principal and previously earned interest.

How much money should be invested now to have $75,000 in twenty years if the interest rate is 7% and the interest is compounded monthly? The answer to the above question is $18,570.15.

Quiz 11: Compound Interest and Present Value

Mariah invested $10,000 in a bank certificate of deposit at a rate of 5% interest compounded annually for three years. ​ ​The total amount of interest compounded over the three years is $1,500.

The total amount of principal and accumulated interest at the end of a loan or investment is known as Present Value.​

If a problem states that interest is compounded quarterly, that means there are 6 compounding periods per year.​

How much must be invested now to have $100,000 in 15 years at 2.5% interested compounded ​quarterly? ​ The answer to the above question is $60,000.

Lori opened a savings account five years ago. Her initial investment was $2,000. Today, she decided to close the account by withdrawing all of the money in her account. The total balance was $3,125. ​ The total amount of interest compounded over the five years was $1,125.​

When using the compounded amount formulas, you must state the interest rate in decimal form. To calculate this, you divide the Annual interest rate by the number of compounding periods per year.​

The idea that money "now," or in the present, is more desirable than the same amount of money in the future because it can be invested and earn interest as time goes by is referred to as "time value of money." ​

The Annual percentage rate is the advertised or stated interest rate of an investment or loan. It is the rate used to calculate the compound interest. ​

Paula starts a savings account with her tax refund money. Currently, the bank is paying 1.5% interest on savings accounts that compounds monthly. If she places her full refund of $1,200 in this account and forgets about it for two years, her compounded balance will be $2,312.79.

Compound interest is interest that is applied a number of times during the term of a loan or investment; interest paid on the principal and previously earned interest.​

How much money should be invested now to have $75,000 in twenty years if the interest rate is 7% and the interest is compounded monthly? ​ The answer to the above question is $18,570.15.

Mariah invested $10,000 in a bank certificate of deposit at a rate of 5% interest compounded annually for three years. The total amount of interest compounded over the three years is $1,500.

The total amount of principal and accumulated interest at the end of a loan or investment is known as Present Value.

If a problem states that interest is compounded quarterly, that means there are 6 compounding periods per year.

How much must be invested now to have $100,000 in 15 years at 2.5% interested compounded quarterly? The answer to the above question is $60,000.

Lori opened a savings account five years ago. Her initial investment was $2,000. Today, she decided to close the account by withdrawing all of the money in her account. The total balance was $3,125. The total amount of interest compounded over the five years was $1,125.

When using the compounded amount formulas, you must state the interest rate in decimal form. To calculate this, you divide the Annual interest rate by the number of compounding periods per year.

The idea that money "now," or in the present, is more desirable than the same amount of money in the future because it can be invested and earn interest as time goes by is referred to as "time value of money."

The Annual percentage rate is the advertised or stated interest rate of an investment or loan. It is the rate used to calculate the compound interest.

Compound interest is interest that is applied a number of times during the term of a loan or investment; interest paid on the principal and previously earned interest.

How much money should be invested now to have $75,000 in twenty years if the interest rate is 7% and the interest is compounded monthly? The answer to the above question is $18,570.15.