Simple & Compound Interest Questions and Answers

A logistics provider plans to have a new warehouse built to handle increasing demands for its services Although the company is unsure of how much demand there will be it must decide now on the size large or small of the warehouse Preliminary estimates are that if a small warehouse is built and demand is low the monthly income will be 700 000 If demand is high it will have to either expand the facility or lease additional space Leasing will result in a monthly income of 100 000 while expanding will result in a monthly income of 500 000 If a large warehouse is built and demand is low monthly income will only be 40 000 while if demand is high monthly income will be 2 million Using a tree diagram identify the choice that would be made using each of the four approaches for decision making under uncertainty a Maximin O Small warehouse O Large warehouse b Maximax O Large warehouse OSmall warehouse c Laplace Assume the probabilities of low and high demand to be 50 each OSmall warehouse O Large warehouse d Minimax regret

Watch Video Show Examples A quantity with an initial value of 590 decays continuously at a rate of 55 per year What is the value of the quantity after 21 months to the nearest hundredth

The lease of Theme Park Inc is about to expire Management must decide whether to renew the lease for another 10 years or to relocate near the site of a proposed motel The town planning board is currently debating the merits of granting approval to the motel A consultant has estimated the net present value of Theme Park s two alternatives under each state of nature as shown below Suppose that the management of Theme Park Inc has decided that there is a 0 41 probability that the motel s application will be approved Options Renew Relocate Alternative a 1 If management uses maximum expected monetary value as the decision criterion calculate expected monetary value for the alternatives Renew and Relocate Renew Relocate Motel Approved 610 000 2 525 000 O Renew Motel Rejected 4 525 000 310 000 a 2 Which alternative should it choose Relocate Expected Value

You want to be able to withdraw 50 000 from your account each year for 30 years after you retire You expect to retire in 25 years If your account earns 10 interest how much will you need to deposit each year until retirement to achieve your retirement goals

You are considering taking out a loan of 5 000 00 that will be paid back over 12 years with every 2 months payments of 101 43 If the interest rate is 6 7 compounded every 2 months what would the unpaid balance be immediately after the twelfth payment The unpaid Sunt imal places

A young executive is going to purchase a vacation property for investment purposes She needs to borrow 108 000 00 for 26 years at 6 4 compounded monthly and will make monthly payments 711 30 Round all answers to 2 decimal places What is the unpaid balance after 10 months s Durin hnu

You have 3 500 on a credit card that charges a 21 interest rate If you want to pay off the credit card in 4 years how much will you need to pay each month assuming you don t charge anything new to the card

You want to buy a 29 000 car The company is offering a 5 interest rate for 60 months 5 years What will your monthly payments be

You deposit 1000 each year into an account earning 6 interest compounded annually How muc will you have in the account in 30 years

A business sets up a sinking fund so they will have a 46 000 00 to pay for a replacement piece of equipment in 12 years when the current equipment will be sold for scrap If they make deposits at the end of every 2 months for 12 years in the investment that pays 7 7 compounded every 2 months what size should each payment be The every 2 months payments are Round to 2 decimal places

A man wants to set up a 529 college savings account for his granddaughter How much would he need to deposit each year into the account in order to have 60 000 saved up for when she goes to college in 18 years assuming the account earns a 7 return

Offer a brief introduction that provides basic context and then a thesis Organize your argument into paragraphs that will enable you to divide and answer the question systematically Incorporate carefully chosen quotes and weave them into the fabric of your argument Explain why your interpretation of the evidence is stronger than alternative theories Provide copious citations Each body paragraph should start with a claim O o present relevant evidence explain the significance of the evidence o weigh counter arguments alternative perspectives O show an awareness of the values and limitations of key sources draw a conclusion

es Factor Company is planning to add a new product to its line To manufacture this product the company needs to buy a new machine at a 479 000 cost with an expected four year life and a 20 000 salvage value Additional annual information for this new product line follows PV of 1 FV of 1 PVA of 1 and FVA of 1 Note Use appropriate factor s from the tables provided Sales of new product Expenses Materials labor and overhead except depreciation Depreciation Machinery Selling general and administrative expenses Required 1 Determine income and net cash flow for each year of this machine s life 2 Compute this machine s payback period assuming that cash flows occur evenly throughout each year 3 Compute net present value for this machine using a discount rate of 7 Complete this question by entering your answers in the tabs below Required 1 1 910 000 1 482 000 114 750 178 000 Required 2 Required 3 Compute net present value for this machine using a discount rate of 7 Note Do not round intermediate calculations Negative amounts should be entered with a minus sign Round your present value factor to 4 decimals and final answers to the nearest whole dollar

5 B2B Company is considering the purchase of equipment that would allow the company to add a new product to its line The equipment costs 379 200 and has a 12 year life and no salvage value B2B Company requires at least an 9 return on this investment The expected annual income for each year from this equipment follows PV of 1 FV of 1 PVA of 1 and FVA of 1 Note Use appropriate factor s from the tables provided Sales of new product Expenses Materials labor and overhead except depreciation Depreciation Equipment Selling general and administrative expenses Income a Compute the net present value of this investment b Should the investment be accepted or rejected on the basis of net present value Complete this question by entering your answers in the tabs below Required A Required B Compute the net present value of this investment Note Round your present value factor to 4 decimals and other final answers to the nearest whole dollar Years 1 through 12 Annual Net Cash Flows X 130 300 x Present Value of Annuity at 9 237 000 83 000 31 600 23 700 98 700 7 5361 Present Value of Net Cash Flows 981 954 my work

13 The fox population in a certain region has a continuous growth rate of 5 percent per year It is estimated that the population in the year 2000 was 30 000 a 4 pts Find a function that models the population t years after 2000 t 0 for 2000 Use P t Poert b 4 pts Use your answer from part a to estimate the fox population in the year 2011 Your answer must be an integer

Complete the following table which shows the performance of two investments over a 5 year period Anjana deposits 5000 in an account that earns simple interest at an annual rate of 4 9 Darin deposits 5000 in an account that earns compound interest at an annual rate of 4 9 and is compounded annually Complete the following table Round to the nearest dollar as needed Year Anjana s Annual Interest 1 2 3 4 5 JUUL Anjana s Balance Darin s Annual Interest Darin s Balance Year 1 2345 Anjana s Annual Interest Anjana s Balance Darin s Annual Interest E

If a company invests 5 000 in new machining equipment by how much must it reduce its annual costs to expect to recover the investment in two years at an interest rate of 10 per year O 2 500 2 701 2 881 2 950

When the interest rate is 8 per year all of the following are equivelant to 8 000 now except O 7 407 one year ago O 10 400 three years from now O 6 858 two years ago O 9 331 two years from now

What is the present worth of the following series of income and expensesif the interest rate is 6 per year Year Expense 0 1 4 5 7 O 5555 6251 6 709 O 5 868 Income 12 000 800 900 9 000 400 200

You want to leave an endowment at your university You want to have an endowment that provides 50 000 worth of scholarships per year At 5 interest how much will you need to contribute O 500 000 O 750 000 1 000 000 O 1 250 000

What is the first year depreciation in the following situation using straight line Purchase price 150 000 Salvage value 25 000 Life of project 6 years 7 257 10 417 O 15 897 O 20 933

Changes in current operating assets and liabilities indirect method Huluduey Corporation s comparative balance sheet for current assets and liabilities was as follows Dec 31 20Y2 Dec 31 20Y1 17 500 12 500 51 650 44 200 8 480 5 100 9 480 6 100 Adjust net income of 75 800 for changes in operating assets and liabilities to arrive at net cash flows from operating activities 70 110 x Accounts receivable Inventory Accounts payable Dividends payable

Complete the following table which shows the performance of two investments over a 5 year period Anjana deposits 5000 in an account that earns simple interest at an annual rate of 4 3 Darin deposits 5000 in an account that earns compound interest at an annual rate of 4 3 and is compounded annually Complete the following table Round to the nearest dollar as needed Anjana s Year Annual Interest 1 23 45 SA Anjana s Balance 55 Darin s Annual Interest Darin s Balance 66 67 SA Year 12345 5 Anjana s Annual Interest Anjana s Balance Darin s Annual Interest D B

How much must be deposited today into the following account in order to have a 105 000 college fund in 16 years Assume no additional deposits are made An account with quarterly compounding and an APR of 3 34 should be deposited today Do not round until the final answer Then round to the nearest cent as needed

Find the monthly interest payment in the situation below Vic bought a new plasma TV for 1800 He made a down payment of 200 and then financed the balance through the store Unfortunately he was unable to make the first monthly payment and now pays 3 interest per month on the balance while he watches his TV What is Vic s monthly interest payment Round to the nearest dollar as needed

Use the following to answer questions 17 18 Figure Market for Loanable Funds II Interest rate r 8 0 Supply x Q 300 17 Figure Market for Loanable Funds II If the interest rate is greater than the quantity supplied of loanable funds will demanded A 8 be greater than B 8 be less than Demand Quantity of loans C 8 equal D 10 be less than then the quantity of loanable funds 18 Figure Market for Loanable Funds II A decrease in government borrowing will shift the demand for loanable funds to the A left and increase the interest rate B right and decrease the interest rate C right and increase the interest rate D left and decrease the interest rate

Use the following to answer questions 12 13 Figure Minimum Wage Wage P3 P P X A Q B Q C 23 D 2 Q Q Q3 12 Figure Minimum Wage With a binding minimum wage of P3 the quantity of labor supplied would be B 23 22 C 24 01 DLO S Q4 Quantity of labor 13 Figure Minimum Wage The binding minimum wage of P leads to unemployment of A 23 2

4 Nominal GDP is A the inflation adjusted GDP B the real GDP minus depreciation C the current dollar GDP D the constant dollar GDP

1 Gross domestic product is the economy s total production of period A good and services B final goods and services C intermediate goods and services D consumer goods and services for a given time

Use the following to answer question 28 Figure Inflationary and Recessionary Gaps Panel a LRAS SRAS AD Price level P3 P P Y Yp Real GDP Price level P3 P P Panel b LRAS C is a long run equilibrium D is caused by flexible wages and prices Yp Y Real GDP A is equal to potential output B when compared with Y would reveal an inflationary gap SRAS 28 Figure Inflationary and Recessionary Gaps In Panel b the level of income associated with Y AD

igu 30 Price Level PO P105 P100 1 b lower interest rates I LRAS E SRAS 2 c an increase in aggregate demand AD Y Y Goods and Services Real GDP SRAS AD 36 In Figure 36 which of the following would most likely cause the movement from point e to point E a higher wages and resource prices

Figure 35 Price Level LRAS LRAS SRAS E Goods and Services Real GDP SRAS AD 35 In Figure 35 which of the following would most likely cause the movement from point E E a an increase in the expected inflation rate c la major technological advance b a decrease in the expected inflation rate

Figure Policy Alternatives Price level P3 P P Panel a LRAS SRAS AD Y Yp Y Real GDP A an inflationary gap B a recessionary gap C no gap SRAS Price level P3 P P Panel b LRAS SRAS Y Yp Y2 AD Real GDP AD2 30 Figure Policy Alternatives In Panel a suppose that the initial equilibrium is at real GDP level Y and price level P At real GDP level Y there is

Starting at age 35 you deposit 2000 a year into an IRA account for retirement Treat the yearly deposits into the account as a continuous income stream If money in the account earns 6 compounded continuously how much will be in the account 30 years later when you retire at age 65 How much of the final amount is interest What is the value of the IRA when you turn 65 Round to the nearest dollar as needed

You save 5 000 per year for the 40 years you are working years 1 40 How much can you withdraw in equal amounts for the 35 years you are retired years 41 75 if the interest rate is 12 O 5 714 28 109 584 49 469 140 15

Listed below are two solutions for a service issue Work out the present costs for option 1 so you can compare it to option 2 Use a 5 interest rate Option 2 35 000 First Cost Maintenance Salvage Life Option 1 a 18 182 Ob 33 888 OC 36 356 O d 41 057 Option 1 15 000 1200 yr 100 3years 900yr 2000 6 years

My company is currently buying an item for 54 We can make the same item internally for a labor cost of 17 a material cost of 11 and a tooling cost of 3 per part However I need to purchase a machine to do the job The machine will cost 450 000 and will require annual maintenance of 35 000 The machine will have a salvage value of 135 000 in seven years At 6 interest what is the break even point O a 1809 Ob 2207 OC 4327 O d 5904

Assume that you buy a new car for 25750 OMR at 7 25 compounded monthly How much is the monthly payment and total interest amount for 1 ii 5 years 8 years

1 6 pts The following information is pertaining to a normal monthly activity of 10 000 units Standard factory overhead rates are based on a normal monthly volume of one standard direct labor hour per unit The total budgeted overhead cost is 165 000 of which the budgeted fixed overhead cost is 65 000 The units actually produced in current month were 10 800 units The actual factory fixed overhead costs incurred were 64 000 and the actual variable overhead costs incurred were 76 000 The actual direct labor hours were 10 000 hours Required 1 Prepare the journal entries to record the fixed overhead variancer

Power Company produces two products Selling price per unit Variable expenses per unit Contribution margin per unit Product A 40 28 12 Product B 16 12 4 Assume the fixed expenses are 57 200 per year The sales mix in units is 60 of A and 40 of B Required Determine the units of Products A and B that must be sold to break even

1 point Let P 0 0 0 Q 1 1 1 R 2 1 1 Find the area of the triangle PQR area Let T 2 4 4 U 2 7 2 V 8 9 7 Find the area of the triangle TUV area

If Alexander earns 5 times the amount that Emma earns what percent is Alexander s earnings compared to Emma s earnings

Estimate 2887 x 729 by first rounding each number so that it has only 1 nonzero digit

a Assuming that you put some money down what was your original loan amount in dollars 46426 D What is the outstanding balance in dollars on your loan after making 4 years of payments 22186 c How much equity in dollars do you have in the garden after 4 years X ubmit Answer Viewing Saved Work Revert to Last Response 76 Points TAMUBUSMATH 6 2 012 0 6 Submissions Used e years ago you acquired a 30 year loan of 130 550 charging 6 6 annual interest compounded monthly and requiring monthly payments At this time interest rates on 15 year loans have dropped to 2 2 APR compounded monthly you wish to refinance what you still owe with a new loan at this new rate How much in dollars will you be refinancing Round your answer to the nearest dollar DETAILS MY NOTES

Recently you made multiple large purchases on your credit card totaling 17 200 The interest rate on your credit card is 15 3 per year compounded monthly and your statement says your minimum payment is 280 per month a How many minimum payments will you need to make in order to pay off your purchases assuming you cut up your credit card and do not make any additional purchases Round your answer up to the nearest number of payments You will need X minimum payments b How much total interest in dollars will you pay by making the minimum monthly payment Round your answer to the nearest dollar x

At age 24 you start an IRA to save for retirement You deposit 325 at the end of each month If you can count on an APR of 5 compounded monthly how much total interest i will you have earned when you retire at age 68 Round your answer to the nearest dollar

You purchase a plot of land worth 58 000 to create a community garden To do so you secure a 10 year loan charging 5 11 APR compounded monthly and requiring monthly payments of 505 Assume the value of the land is still 58 000 Round each answer to the nearest dollar a Assuming that you put some money down what was your original loan amount in dollars b What is the outstanding balance in dollars on your loan after making 4 years of payments c How much equity in dollars do you have in the garden after 4 years

2 If the sum of five positive distinct even two digi numbers with different digits is 140 what is the maximum of the greatest one

Given the above information in Q1 Shannon s wants to increase its sales to retailers by 20 in the next year Management estimates that the incremental promotion program required to generate sufficient demand to boost sales by 20 will be 60 000 exclusive of commission 59 882 43 244 Personal Selling Costs Consumer Advertising Trade Promotion Sales Promotion 25 000 Shannon s will need to hire an additional salesperson paid a salary and commission and provide some added administrative support The salesperson s salary plus administrative support will cost about 60 000 per year The salesperson s commission will be the equivalent of 0 05 per six pack sold Unit variable costs exclusive of the salesperson s commission are the same as in Q1 The incremental costs of consumer advertising trade promotion and sales promotion necessary to support sales in the new market will be substantial as indicated in the table above How many six packs must be sold to break even on the incremental costs that are anticipated

A recent graduate s student loans total 18 000 If these loans are at 5 compounded quarterly for 8 years what are the quarterly payments