VIEWS: 1,261 PAGES: 5 CATEGORY: Accounting POSTED ON: 7/12/2009
1 Chapter 21.1 Using the simple interest formula and the accumulated simple interest formula, solve: P = $500; r = 0.08; t = 6months; I =? P = $40; I = $400; t = 4years; r =? P = $100; r = 8%; t = 18months; A =? A = $8000; r = 12%; t = 3years; P =? If $3000 is invested in a savings account for 4 months at 4.5% interest rate, how much total interest is earned? How much will you accumulate on a savings account that has $500 in it for 3 years with an interest rate of 5.25%? 2 Chapter 21.2 Using the compound interest formulas and the Rule of 72, solve: P = $100; r = 4%; n = monthly; t = 8months; A =? P = $1000; r = 5.25%; n = quarterly; t = 3months; A =? A = $18000; r = 8.75%; n = semi − annually; t = 2years; P =? A = $50000; r = 8.5%; n = annually; t = 3years; P =? If $100 is invested into a savings account with a 6% interest rate, and compounded: (A) annually, (B) quarterly, (C) monthly, what is the amount after 4 years? How much interest is earned? Which compounding period is the best? If $5,000 is invested into a savings account and compounded semi-annually with an interest rate of 5%, what is the amount after: (A) 2 years, (B) 4 years? How much interest is earned? You want to double your investment of $4,500. How long will that take if the bank compounds annually? Does that amount of time give you more or less than $9,000? (i.e. check it) 1 3 Chapter 21.3 Using the continuously compounding formula, solve: P = $100; r = 8%; t = 18months; A =? P = $6000; r = 6%; t = 8months; A =? A = $1000; r = 10%; t = 5years; P =? A = $8000; r = 12%; t = 3years; P =? and solve for the total interest. 4 Chapter 21.4 Using the savings formula with compounding periodic deposit, solve: d = $250; r = 8.5%; t = 8months; n = monthly; A =? d = $500; r = 6%; t = 2years; n = quarterly; A =? A = $10000; r = 11.5%; t = 4years; n = quarterly; d =? A = $85000; r = 4.5%; t = 6years; n = monthly; d =? Stan deposits %250 monthly into a savings account. If he keeps depositing for 2 years, with an interest rate of 4.5%, how much will he have? How much total interest does he earn? Jill wants $5,000 in her savings account after 5 years. How much are her quarterly deposits if the interest rate is 4.5%? How much total interest does she earn? If Stan has $50,000 in his savings account after 10 years, how much is he depositing monthly if the bank has a 5.75% interest rate? 5 Chapter 21.5 Using the inﬂation, deﬂation, depreciation formula, solve: inﬂation: P = $75.00; r = 2.5%; t = 3years; A =? 2 P = $100.00; r = 5.5%; t = 6years; A =? deﬂation: P = $75.00; a = 2.5%; t = 3years; A =? P = $100.00; a = 5.5%; t = 6years; A =? depreciation: P = $75.00; r = 2.5%; t = 3years; A =? P = $100.00; r = 5.5%; t = 6years; A =? Know how to use the CPI formula. 6 Chapter 21.6 Using the dividends formula, solve: D = $15.00; r = 2.5%; g = 8%; P =? P = $210.00; r = 5.5%; g = 2.5%; D =? P = $350.00; D = $25; g = 11.5%; r =? D = $100.00; P = $50, 000; r = 15%; g =? In 2005, Leah bought stock in the Straw Company. The expected growth rate is 7.5% and the discount rate is 10.3%. If last years dividends were $25.00, what is the present value? 7 Chapter 22.1 Using add on loan formulas and discount formulas, solve: P = $375, r = 5.6%, n = monthly, t = 3years, I =?, A =?, d =? P =?, r = 5.6%, n = monthly, t = 4years, I =?, A =?, d = $280 P = $150, r =?, n = monthly, t = 5years, I =?, A = $1500, d =? Kelly gets an add on loan with an interest rate of 4.5%. She has 4 years to pay 3 it oﬀ in monthly installments. If her total interest is $4,325, how much was her total loan after the 4 years? How much are her monthly payments? Chrissy gets a discount loan with an interest rate of 5.4%. She has 6 years to pay it oﬀ in monthly installments. If her total loan is $4,325 after the 6 years, how much was her total interest? How much are her monthly payments? 8 Chapter 22.2 Using repaying loan, and saving to pay oﬀ your loan, solve: P = $1500; r = 5.5%; n = quarterly; t = 3years; A =? A = $8000; r = 8.7%; n = monthly; t = 2years; P =? Use the above but solve with saving to pay oﬀ with P = d. Mark gets a loan for $9,000. He must repay it in 3 years. His interest rate is 11.25%. How much does he owe after the 3 years if he is to make quarterly payments? What is the total interest earned on the loan? Sam needs to save to repay oﬀ her student loans of $40,000. He plans on making monthly payments for 5 years to pay oﬀ the debt. How much are his monthly payments if the interest rate is 9.99%? What is the total interest earned on the loan? Know how to use the APR and EAR formulas. 9 Chapter 22.3 Using amortization formula, (equity) solve: P M T = $150; r = 9.5%; n = quarterly; t = 10years; A =? A = $80000; r = 8.7%; n = monthly; t = 5years; P M T =? The Mitchell’s have bought a house for $240,000. They have a 30 year mortgage to pay the house oﬀ. What are their monthly payments if the interest is 3.7%? How much equity do they have after the ﬁrst 10 years? The Mitchell’s have bought a house for $150,000. They have a 30 year mortgage to pay the house oﬀ. What are their monthly payments if the interest is 4.5%? How 4 much equity do they have after the ﬁrst 15 years? 10 Chapter 22.4 Using amortization formula, (annuity) solve: P M T = $250; r = 8.5%; n = quarterly; t = 25years; A =? A = $60000; r = 7.7%; n = monthly; t = 30years; P M T =? How much should you invest in an annuity if you want to receive $2000 for 10 years on a monthly base if the annuity has an interest rate of 5.5%? If you invest $150,000 into an annuity, how much do you receive monthly for 20 years if the annuity has an interest rate of 6.75%? 5