Compound Interest Equations

Compound interest 5.5  Solve each of the following with the equation AP1 i or by graphing. n What amount needs to be invested now to save $12 000 in 6 years at 7.5% compounded annually? What interest rate must you get if you want $500 to grow into $814.45 in 10 years? How long will it take $200 to become $318.77 if it is invested at 6%/annum compounded annually? If you need $1500 in 2 years and can earn 4.5%/a compounded annually, how much should you invest now? 5. You have $1000 you want to invest into a GIC. Bank A is offering a 4 year GIC at 3% per annum and Bank B is offering a 3 year GIC at 4% per annum. If both GIC’s are compounded annually, which bank will earn you the most money? How much more do you earn? 6. If you have $100 and you want it to double – what interest rate must you earn for this to happen in 5 years? Is this reasonable? 7. How long will it take $50 to double in an account that pays 5% per annum? Key 1. $7775.54 2. 5% 3. 8 years 1. 2. 3. 4. 4. 1373.59 5. Bank A , $0.65 more 6. 15% not in 2001 7. 15 years (14 and a bit) Compound interest 5.5  Solve each of the following with the equation AP1 i or by graphing. n What amount needs to be invested now to save $12 000 in 6 years at 7.5% compounded annually? What interest rate must you get if you want $500 to grow into $814.45 in 10 years? How long will it take $200 to become $318.77 if it is invested at 6%/annum compounded annually? If you need $1500 in 2 years and can earn 4.5%/a compounded annually, how much should you invest now? 5. You have $1000 you want to invest into a GIC. Bank A is offering a 4 year GIC at 3% per annum and Bank B is offering a 3 year GIC at 4% per annum. If both GIC’s are compounded annually, which bank will earn you the most money? How much more do you earn? 6. If you have $100 and you want it to double – what interest rate must you earn for this to happen in 5 years? Is this reasonable? 7. How long will it take $50 to double in an account that pays 5% per annum? Key 1. $7775.54 2. 5% 3. 8 years 4. 1373.59 5. Bank A , $0.65 more 6. 15% not in 2001 7. 15 years (14 and a bit) 1. 2. 3. 4.