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Compound Interest Equations - DOC

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This is an example ofcompound interest equations. This document is useful for studying compound interest equations.

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									                                    Compound interest 5.5

                                                   
                                                AP1 i or by graphing.
                                                         n
Solve each of the following with the equation

1. What amount needs to be invested now to save $12 000 in 6 years at 7.5% compounded annually?
2. What interest rate must you get if you want $500 to grow into $814.45 in 10 years?
3. How long will it take $200 to become $318.77 if it is invested at 6%/annum compounded annually?
4. 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                           4. 1373.59                           7. 15 years (14 and a bit)
2. 5%                                 5. Bank A , $0.65 more
3. 8 years                            6. 15% not in 2001




                                    Compound interest 5.5

                                                   
                                                AP1 i or by graphing.
                                                         n
Solve each of the following with the equation

1. What amount needs to be invested now to save $12 000 in 6 years at 7.5% compounded annually?
2. What interest rate must you get if you want $500 to grow into $814.45 in 10 years?
3. How long will it take $200 to become $318.77 if it is invested at 6%/annum compounded annually?
4. 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                           4. 1373.59                           7.   15 years (14 and a bit)
2. 5%                                 5. Bank A , $0.65 more
3. 8 years                            6. 15% not in 2001

								
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