Question 1

Match the following terms with their definitions.
-Monthly
A)Year times number of times compounded in one year
B)Twice a year
C)Stated rate
D)True rate of interest
E)Amount calculated on adjusted principal
F)Periodically interest is calculated and added to principal
G)Rate divided by number of times compounded per year
H)Know future amount looking for present
I)Four times per year
J)Twelve times per year

Accepted Answer

Monthly compounding means interest is calculated and added to the principal twelve times per year, which matches the definition for option J.

Question 2

Match the following terms with their definitions.
-Effective rate (APY)
A)Year times number of times compounded in one year
B)Twice a year
C)Stated rate
D)True rate of interest
E)Amount calculated on adjusted principal
F)Periodically interest is calculated and added to principal
G)Rate divided by number of times compounded per year
H)Know future amount looking for present
I)Four times per year
J)Twelve times per year

Accepted Answer

The Effective rate (APY) or Annual Percentage Yield is the true rate of interest earned in a year, taking into account the effect of compounding.

Question 3

Match the following terms with their definitions.
-Periods
A)Year times number of times compounded in one year
B)Twice a year
C)Stated rate
D)True rate of interest
E)Amount calculated on adjusted principal
F)Periodically interest is calculated and added to principal
G)Rate divided by number of times compounded per year
H)Know future amount looking for present
I)Four times per year
J)Twelve times per year

Accepted Answer

The term "Periods" in the context of finance typically refers to the number of times interest is compounded in one year, which matches with "Year times number of times compounded in one year."

Question 4

Solve by using compound table:
 $$\begin{array} { | l | l | l | l | l | l | l | } 
\hline \text { Principal } & \text { Time } & \begin{array} { l } 
\text { Rate of } \
\text { Compound }
\end{array} & \begin{array} { l } 
\text { When } \
\text { Compounded }
\end{array} & \begin{array} { l } 
\text { \# of Periods to be } \
\text { Compounded }
\end{array} & \begin{array} { l } 
\text { Total } \
\text { Amount }
\end{array} & \begin{array} { l } 
\text { Total } \
\text { Interest }
\end{array} \
\hline \$ 300 & 1 \text { year } & 6 \% & \text { Quarterly } & \text { A } & \text { B } & \text { C } \
\hline
\end{array}$$

Accepted Answer

The answer of Solve by using compound table:
 \[\begin{array} {...

Question 5

Jarad Rodriguez deposits $10,000 at 10% compounded semiannually. At the start of year 6, Jarad deposits an additional $5,000 that is compounded at the same rate. At the end of 10 years, what is the balance in Jarad's account?

Accepted Answer

10 periods 5%; $10,000 × 1.6289 = $16,289 + $5,000 = $21,289; $21,289 × 1.6289 = $34,677.65.

Question 6

Solve by using compound table:
 $$\begin{array} { | l | l | l | l | l | } 
\hline \text { Principal } & \text { Rate } & \text { Time } & \begin{array} { l } 
\text { When } \
\text { Compounded }
\end{array} & \text { Total Amount } \
\hline \$ 15,000 & 12 \% & \text { 4 years } & \text { Quarterly } & \text { ? } \
\hline
\end{array}$$

Accepted Answer

The answer of Solve by using compound table:
 \[\begin{array} {...

Question 7

Pete Sist wants to buy a new Chevrolet in five years. He estimates the car will cost $24,000. Assuming Pete invests $15,000 now at 10% interest compounded semiannually, will he have enough money to buy the car at the end of five years?

Accepted Answer

10%/2 = 5%; 5 × 2 = 10 periods; $15,000 × 1.6289 = $24,433.50; yes.

Question 8

Solve by using compound table:
 $$\begin{array} { | l | l | l | l | l | } 
\hline \text { Principal } & \text { Rate } & \text { Time } & \begin{array} { l } 
\text { When } \
\text { Compounded }
\end{array} & \text { Total Amount } \
\hline \$ 8,000 & 10 \% & 3 \text { years } & \text { Semiannually } & \text { ? } \
\hline
\end{array}$$

Accepted Answer

The answer of Solve by using compound table:
 \[\begin{array} {...

Question 9

Molly Scupper wants to attend Clarke University. She will need $90,000 eight years from today. Assume Molly's bank pays 6% interest compounded semiannually. What must Molly deposit today to have $90,000 in eight years? Verify your answer.

Accepted Answer

$90,000 × .6232 = $56,088; Verify by $56,088 × 1.6047 = $90,004.41. Answer is slightly different than 90,000 due to rounding of the table factors

Question 10

Use the present value table to complete:
 $$\begin{array} { | l | l | l | l | l | l | l | } 
\hline  \text { Future } & & & & & & \
\text { Amount } & \text { Length of } & \text { Rate } & \text { Table } & \text { Rate } & \text { P.V. } & \text { P.V. } \
 \text { Desired } & \text { Time } & \text { Compounded } & \text { Period } & \text { Used } & \text { Factor } & \text { Amount } \
\hline \$ 11,000 & 6 \text { yrs } & 12 \% \text { quarterly } & \text { A } & \text { B } & \text { C } & \text { D } \
\hline
\end{array}$$

Accepted Answer

The answer of Use the present value table to complete:
...

Question 11

Find effective rate (APY)and show work: (round answer to the nearest hundredth)
 $$\begin{array} { | l | l | l | l | } 
\hline \text { Principal } & \text { Rate } & \begin{array} { l } 
\text { When } \
\text { Compounded }
\end{array} & \begin{array} { l } 
\text { Effective Rate } \
\text { (APY) }
\end{array} \
\hline \$ 5,000 & 10 \% & \text { Semiannually } & \text { ? } \
\hline
\end{array}$$

Accepted Answer

The answer of Find effective rate (APY)and show work: (round...

Question 12

Kathy Crag, the owner of The Fabric Corner, lent $15,000 to Dani Flynn to open her own card shop. Dani plans to repay Kathy at the end of 7 years with 8% interest compounded quarterly. How much will Kathy receive at the end of 12 years?

Accepted Answer

8% / 4 = 2%; 7 × 4 = 28; $15,000 × 1.7410 = $26,115

Question 13

John Riviera deposits $14,000 in National Bank at 8% compounded quarterly. What is the effective rate (APY)of interest? (round answer to nearest hundredth)

Accepted Answer

$14,000 × 1.0824 = $15,153.60; $15,153.60 - $14,000 = $1,153.60/$14,000 = 8.24%.

Question 14

Match the following terms with their definitions.
-Present value
A)Year times number of times compounded in one year
B)Twice a year
C)Stated rate
D)True rate of interest
E)Amount calculated on adjusted principal
F)Periodically interest is calculated and added to principal
G)Rate divided by number of times compounded per year
H)Know future amount looking for present
I)Four times per year
J)Twelve times per year

Accepted Answer

Present value is the current value of a future sum of money or stream of cash flows given a specified rate of return. It represents the concept of determining the value today (present) of an amount of money in the future, taking into account a specific interest rate or discount rate over time. This is why option H, "Know future amount looking for present," correctly matches the definition of present value, as it involves calculating the current worth of a future amount.

Question 15

Use the present value table to complete:
 $\begin{array}{|l|l|l|l|l|l|l|}
\hline \begin{array}{l}
\text { Future } \
\text { Amount }
\end{array} & \text { Length of } & \text { Rate } & \text { Table } & \text { Rate } & \text { P.V. } & \text { P.V. } \
\text { Desired } & \text { Time } & \text { Compounded } & \text { Period } & \text { Used } & \text { Factor } & \text { Amount } \
\hline \$ 9,000 & 20 \mathrm{yrs} & \begin{array}{l}
10 \% \
\text { semiannually }
\end{array} & \text { A } & \text { B } & \text { C } & \text { D } \
\hline
\end{array}$

Accepted Answer

The answer of Use the present value table to complete:
...

Question 16

Jim Smith believes that in 30 years he will need $80,000 to buy a retirement cottage. Assuming he gets an interest rate of 9% compounded annually, how much will he have to invest today to reach his retirement goal?

Accepted Answer

$80,000 × .0754 = $6,032.

Question 17

Match the following terms with their definitions.
-Interest
A)Year times number of times compounded in one year
B)Twice a year
C)Stated rate
D)True rate of interest
E)Amount calculated on adjusted principal
F)Periodically interest is calculated and added to principal
G)Rate divided by number of times compounded per year
H)Know future amount looking for present
I)Four times per year
J)Twelve times per year

Accepted Answer

Interest is the amount calculated on the adjusted principal, which is the principal amount plus any previously accumulated interest.

Question 18

Complete without using tables. (Show work.)
 $$\begin{array} { | l | l | l | l | l | l | l | } 
\hline \text { Principal } & \text { Time } & \begin{array} { l } 
\text { Rate of } \
\text { Compound }
\end{array} & \begin{array} { l } 
\text { When } \
\text { Compounded }
\end{array} & \begin{array} { l } 
\text { \# of Periods to be } \
\text { Compounded }
\end{array} & \begin{array} { l } 
\text { Total } \
\text { Amount }
\end{array} & \begin{array} { l } 
\text { Total } \
\text { Interest }
\end{array} \
\hline \$ 300 & 1 \text { year } & 6 \% & \text { Quarterly } & \text { A } & \text { B } & \text { C } \
\hline
\end{array}$$

Accepted Answer

The answer of Complete without using tables. (Show work.)
 \[\begin{array}...

Question 19

Moxie Fox deposited $30,000 in a savings account at 6% interest compounded semiannually. At the beginning of year 4, Moxie deposits an additional $60,000 at 6% interest compounded semiannually. At the end of six years, what is the balance in Moxie's account?

Accepted Answer

3% 6 periods $30,000 × 1.1941 = $35,823.00 + $60,000 = $95,823
$95,000 × 1.1941 = $114,422.24.

Question 20

Juanita Finn deposits $12,000 into Valley Bank, which pays interest of 8% compounded annually for four years. How much will Juanita have in her account?

Accepted Answer

$12,000 × 1.3605 = $16,326

Quiz 12: Compound Interest and Present Value

Match the following terms with their definitions. -Monthly

Match the following terms with their definitions. -Effective rate (APY)

Match the following terms with their definitions. -Periods

Jarad Rodriguez deposits $10,000 at 10% compounded semiannually. At the start of year 6, Jarad deposits an additional $5,000 that is compounded at the same rate. At the end of 10 years, what is the balance in Jarad's account?

Pete Sist wants to buy a new Chevrolet in five years. He estimates the car will cost $24,000. Assuming Pete invests $15,000 now at 10% interest compounded semiannually, will he have enough money to buy the car at the end of five years?

Molly Scupper wants to attend Clarke University. She will need $90,000 eight years from today. Assume Molly's bank pays 6% interest compounded semiannually. What must Molly deposit today to have $90,000 in eight years? Verify your answer.

Kathy Crag, the owner of The Fabric Corner, lent $15,000 to Dani Flynn to open her own card shop. Dani plans to repay Kathy at the end of 7 years with 8% interest compounded quarterly. How much will Kathy receive at the end of 12 years?

John Riviera deposits $14,000 in National Bank at 8% compounded quarterly. What is the effective rate (APY)of interest? (round answer to nearest hundredth)

Match the following terms with their definitions. -Present value

Jim Smith believes that in 30 years he will need $80,000 to buy a retirement cottage. Assuming he gets an interest rate of 9% compounded annually, how much will he have to invest today to reach his retirement goal?

Match the following terms with their definitions. -Interest

Moxie Fox deposited $30,000 in a savings account at 6% interest compounded semiannually. At the beginning of year 4, Moxie deposits an additional $60,000 at 6% interest compounded semiannually. At the end of six years, what is the balance in Moxie's account?

Juanita Finn deposits $12,000 into Valley Bank, which pays interest of 8% compounded annually for four years. How much will Juanita have in her account?