Simple & Compound Interest Questions and Answers

Justice just retired, and has $790,000 to invest. A very safe Certificate of Deposit (CD) account pays 2.5%, while a riskier bond fund pays 5.5% in interest. Justice figures he needs $28,000 a year in interest to live on. How much should he invest in each account to make enough interest while minimizing his risk? at 2.5% at 5.5%

Nikola just turned 42 years old and is planning to retire at age 61. She has already saved $201,000.00 in her RRSP. If she continues to contribute $500.00 at the beginning of every month, how much money will be in her RRSP at retirement if it can earn 8.7% compounded monthly? No deposit is made the day she turns 61. a. Use the compound interest formula, FV = PV(1 + i), to find the future value of the current amount in the investment. At retirement, the $201,000.00 will have grown to b. Determine the annuity type. Ordinary Simple Annuity Ordinary General Annuity Simple Annuity Due General Annuity Due c. Identify the following pieces of information to be used to calculate the future value of the annuity. Periodic Payment: PMT= Number of Payments per Year: PY = Total Number of Payments: N Annual Interest Rate: r = d. Determine the total value of the investment at retirement (incorporating your answer from part a. above). Number of Compoundings per Year: CY=

On July 1 Jacob deposited $2540 in a savings account at Association. At the end of December, his intrest was computed at an annual rate of 9%. Calculate his bank balance on July 1 the following year.

A $960 investment is compounded annually at a rate of 3% each year. How long will it take for the investment to double? Add an attachment to show your work. Round values to 2 decimal places.

Sutton deposited $12, 500 into an account paying 3.91% annual interest compounded monthly. How much money will be in the account after 7 years? (also called Future value). Round to the nearest cent if necessary. Choose one 4 points $16,427.94 $16,427.00 $16,595.00 $16,594.94

Michael wants to purchase a Jeep. The purchase price of the Jeep is $37,000. The dealership will allow him to pay cash or finance the Jeep with a down payment of $5,000 and 60 monthly payments of $625. Michael chose to finance the jeep. Answer the following questions. a) What is the amount financed? b) What is the total amount of monthly payments? c) What is the amount of the finance charge?

The Stationery Company purchased merchandise on account from a supplier for $11,600, terms 2/10, n/30. The Stationery Company returned merchandise with an invoice amount of $1,400 and received full credit. a. If The Stationery Company pays the invoice within the discount period, what is the amount of cash required for the payment? b. Under a perpetual inventory system, what account is credited by The Stationery Company to record the return?

starting 1 year from today, you will get 20 annual payments of $1,000,000. But to get your money today you make a deal stating that you will get all of those future payments today assuming the future inflation rate is 10% ($1 a year from now is worth .90, $2 a year from now is worth (.90)2 in general, n dollars in 1 year is worth (.90)n. How much will you get paid NOW? How much will you get paid if the payments go on forever instead of 20 years from now?

Richard invests $120.72 every month into his 401k. At the end of 30 years, he has a balance of $184,643.4. How much interest did he earn over 30 years? Round each answer to the nearest cent and do not enter the $ as part of your answer, enter a number only.

A 40-year-old man in the U.S. has a 0.242% risk of dying during the next year. An insurance company charges $250 per year for a life-insurance policy that pays a $100,000 death benefit. What is the expected value for the person buying the insurance? Round your answer to the nearest dollar. Expected Value: $ for the year

A man with $20,000 to invest decides to diversify his investments by placing $10,000 in an account that earns 8.2% compounded continuously and $10,000 in an account that earns 9.4% compounded annually. Use graphical approximation methods to determine how long it will take for his total investment in the two accounts to grow to $35,000. It will take approximately______ years for his total investment in the two accounts to grow to $35,000. (Type an integer or decimal rounded to one decimal place as needed.)

For the following questions, use the compound interest formula, A(t) = P(1 + r/n)^nt After a certain number of years, the value of an investment account is represented by the expression 10250(1+ 0.03/4)^ 52 a. What is the value of the account, rounded to the nearest dollar? (Use the "$" symbol in your answer.) b. What was the initial deposit made to the account? (Use the "$" symbol in your answer.) c. How many years had the account been accumulating interest? years

A 2022 Toyota 4Runner costs $52,420. Assume the car depreciates a total of 24% during its first 5 years. (A) What is the value of the car after 5 years? (B) Suppose the depreciation is exponential. Write a formula for the value of the car when it is t years old. (C) Suppose the depreciation is linear. Write a formula for the value of the car when it is t years old. (D) If you were buying this car today and planning to trade it in after 3 years, which depreciation model would you prefer and why?

You hold a 16 year bond that is callable in 6 years. The call premium is one semi-annual coupon payment, and the coupon rate is0.08. The current YTM is 0.065. What is the yield to call? 0.0563 0.0595 0.0546 0.0580 0.0609

Considering the following: 10 year, semi-annual bond, 0.08 YTM, 1096 current price. Par is 1000 What should the coupon rate be for this bond? 0.0941 0.0856 0.0891 0.0990 0.0810

You hold an annual coupon bond for 1 year, receiving the 0.1 coupon before selling. When bough it had 9 years to maturity, and the YTM was 0.04. Over the year, interest rates FELL by -0.01. What is the total holding period return for this investment? 0.1004 0.0879 0.0941 0.0977 0.0910

You examine a pension obligation for your company and would like to immunize it from interest rate movements. This obligation has a duration of 14.19 years, and if you only used two types of bonds, how much would you allocate to PERPETUITIES if your only other bonds available were 7 year, zero coupon bonds? Interest rates currently yield 0.055 0.6332 0.5902 0.6582 0.6126 0.5661

Considering the following: 6 year, semi-annual bond, 0.12 coupon, 966 current price. Par is 1000 What is the current yield? 0.1242 0.1379 0.1181 0.1313 0.1410

If an investment can earn 4% compounded monthly, what amount must you invest now in order to accumulate $12,000 after 3 1/2 years? $12,173.85 $13,912.97 $17,391.21 $10,434.73 $15,652.09 None of the answers is correct

10. The manager of the bank where you work tells you that your bank has $10 million in excess reserves. She also tells you that the bank has $400 million in deposits and $375 million dollars in loans. Given this information you find that the reserve requirement must be A. 10/400. B. 15/400. C. 25/400. D. 35/400.

John buys good X, and would be willing to pay more than he now has to pay. Suppose that John has a change in his tastes such that he values good X more than before. If the market price is the same as before, then A. John's consumer surplus would be unaffected. B. John's consumer surplus would increase. C. John's consumer surplus would decrease. D. John would be wise to buy less of good X than before.

Solve the following problem. PV = $23,230; n = 106; i = 0.01; PMT= ?; PMT=S (Round to two decimal places.)

The prepaid insurance account had a beginning balance of $4,120 and was debited for $1,980 of premiums paid during the year. Journalize the adjusting entry required at the end of the year, assuming the amount of unexpired insurance related to future periods is $1,770. If an amount box does not require an entry, leave it blank. Insurance Expense Prepaid Insurance

Assume that you borrow 2 million USD from some bank under the system of 6% yearly compound interest and repay 150,000 USD every year. So, you will pay off at the (1) th payment.

Effect of Errors on Adjusted Trial Balance For each of the following errors, considered individually, indicate whether the error would cause the adjusted trial balance totals to be unequal. If the error would cause the adjusted trial balance totals to be unequal, indicate whether the debit or credit total is higher and by how much. a. The adjustment for accrued wages of $3,380 was journalized as a debit to Wages Expense for $3,380 and a credit to Accounts Payable for $3,380. Enter the difference between the debit and credit totals. If the totals are equal, enter a zero. b. The entry for $3,240 of supplies used during the period was journalized as a debit to Supplies Expense of $3,240 and a credit to Supplies of $3,420. Enter the difference between the debit and credit totals. If the totals are equal, enter a zero.

Adjustment for Unearned Revenue On June 1, 20Y2, Herbal Co. received $40,700 for the rent of land for 12 months. Journalize the adjusting entry required for unearned rent on December 31, 20Y2. Round your answers to the nearest dollar amount. If an amount box does not require an entry, leave it blank. Dec. 31 Unearned Rent Rent Revenue

John takes out a loan for $8000 at 9% interest compounded monthly and is making payments of $84 a month. Calculate his remaining balance after 30 months. John's balance due after 30 months will be $

You deposit $400 each month into an account earning 6% interest compounded monthly. a) How much will you have in the account in 15 years? $ b) How much total money will you put into the account? $ c) How much total interest will you earn? $

John makes an investment of $10,800 into an account that pays interest compounded annually. In addition, he makes a yearly deposit of $110. At the end of 3 years, his balance is $15,800. Determine the interest he earned on the savings account. Round your answer to two decimal places. John's annual percentage rate on his investment was %.

You want to be able to withdraw $20,000 from your account each year for 30 years after you retire. You expect to retire in 20 years. If your account earns 8% interest, how much will you need to deposit each year until retirement to achieve your retirement goals? $ Round your answer to the nearest cent.

You want to take out a $319,000 mortgage (home loan). The interest rate on the loan is 5%, and the loan is forN30 years. Your monthly payments are $1,712.46. How much will still be owed after making payments for 15 years? $ Round your answer to the nearest dollar. How much will still be owed after making payments for 20 years? $ Round your answer to the nearest dollar. How much will still be owed after making payments for 25 years? $

Determine the amount of markup, the amount of overhead, the profit or loss realized on the sale, the rate of markup based on cost, and the rate of markup based on selling price. Cost = $40.00 Selling = $73.00 Overhead = 20% of selling price M = Markup = E = Expenses = P= Profit or Loss = Do not include the $ sign in your answers. Do not include the % sign in your answers. me = Markup based on Cost (Correct to 3 decimal places) = m, = Markup based on Selling (Correct to 3 decimal places) =

Considering the following: 7 year, semiannual bond, 0.095 coupon, 1020 current price. Par is 1000 What is the YTM? 0.1012 0.1056 0.0911 0.1115 0.0951

Suppose you want to have $700,000 for retirement in 20 years. Your account earns 5% interest. Round your answers to the nearest cent. a) How much would you need to deposit in the account each month? b) How much interest will you earn? $

You deposit $100 each month into an account earning 5% interest compounded monthly. a) How much will you have in the account in 15 years? Round to the nearest cent as needed. $ b) How much total money will you put into the account? Round to the nearest cent as needed? $ c) How much total interest will you earn? Round to the nearest cent as needed? $

You deposit $975 in an account that pays 5% annual interest compounded continuously. After 6 years, the balance is $

A married couple has a combined income of $50,000. Using standard Fannie Mae/Freddie Mac guidelines, how much will be allowed for their total debt obligations each month? A) $1,500 B) $1,800 C) $1,400 D) $1,900

You want to buy a $240,000 home. You plan to pay 15% as a down payment, and take out a 30 year loan at 5.75% interest for the rest. a) How much is the loan amount going to be? b) What will your monthly payments be? c) How much total interest do you pay? d) Suppose you want to pay off the loan in 15 years rather than 30. What will your monthly payment be? e) How much money in interest will you save if you finance for 15 years instead of 30 years?

You plan to purchase items for $3400 and will finance the cost with a simple interest fixed installment loan. The seller tells you that you will have to pay $115 per month for 36 months. a. What is the finance charge? b. What is the simple interest rate? (Round to the nearest hundredth)

You want to be able to withdraw $50,000 from your account each year for 25 years after you retire. You expect to retire in 20 years. If your account earns 4% interest, how much will you need to deposit each year until retirement to achieve your retirement goals? $ Round your answer to the nearest cent.

Meryl is 30 years old. She wants to begin saving for retirement, with the first payment to come one year from now. She can save $8,500 per year, and her financial advisor advises her to invest in the stock market, which the financial advisor expects to provide an average return of 10% in the future. If Meryl follows her financial advisor's advice, how much money will she have at 65? $3,400,309.42 $4,726,821.57 $1,378,819.34 $2,303,707.13

Mason just won the Utah lottery. He has the choice of $58,500,000 today or a 30-year annuity of $6,710,000, with the first payment coming one year from today. What rate of return is built into the annuity? 29.06% 10.96% 11.14% 12.41%

Anne took a $778,000 mortgage. The 30-year mortgage has a 3.25% nominal annual interest rate, but it calls for monthly payments beginning one month later. (Hint: Be careful that it is a "monthly" payment. Therefore, the total number of payments is not equal to the year of Anne's mortgage, but the total number of monthly payments for Anne's 30-year mortgage, that is 12 x 30. Moreover, the monthly rate instead of the annual rate should be used. You can easily get the monthly rate by the nominal annual rate given using the the content discussed in Ch5 Part II, that is, monthly rate = nominal annual rate/12.) What is the dollar amount of each payment Anne pays? $3,385.91 $2,161.11 $25,285.25 $40,986.38

If the APR (annual percentage rate) of your Citibank credit card is stated to be 19.45%, with interest paid monthly, what is the card's EFF%? 21.28% 22.17% 20.21% 19.96%

Moderna Incorporation's stock has a beta of 1.69, the risk-free rate is 2.25%, and the market risk premium is 10.85%. What is the firm's required rate of return? Round your intermediate calculations to at least 4 decimal places. 16.78% 20.59% 16.09% 18.34%

An investment firm invested in two companies last year. They invested $8000 in Company A and made a profit of 11%. They invested $24,000 in Company B and made a profit of 13%. Answer the questions below. Do not do any rounding. (a) What was the investment firm's total profit? $ (b) What was the percent profit for their total investment? %

Suppose you invest $170 a month for 6 years into an account earning 7% compounded monthly. After 6 years, you leave the money, without making additional deposits, in the account for another 28 years. How much will you have in the end? ____________S

John is 25 years old and wants to have 1 million dollars in savings by the time he retires at 65. He plans to open a savings account that pays 6% interest compounded quarterly and he will be making $150 quarterly deposits into the account. John will need to make an initial deposit of $__________ to reach his goal of 1 million dollars in

John takes out a 3 year loan for $10100 at 6% interest compounded monthly. Calculate his monthly payme John's monthly payment will be $___________

You want to take out a $172,000 mortgage (home loan). The interest rate on the loan is 4.6%, and the loan is for 30 years. Your monthly payments are $881.75. How much will still be owed after making payments for 15 years? $ Round your answer to the nearest dollar. How much will still be owed after making payments for 20 years? $ Round your answer to the nearest dollar. How much will still be owed after making payments for 25 years? $ Round your answer to the nearest dollar.