Problem identification practice
Math 118 ___________________
Instructions: Identify each kind of problem as Simple interest, Present value, future value, present or
future value of ordinary annuity, sinking fund, amortization, annuity due, or what?
A _______ Mr Gordon plans to invest $300 at the end of each year for 12 years in a savings account.
If the account pays 9% compounded annually, how much will he have at the end of the 12
B _______ How much will have to be invested at the end of each year at 10%, compounded annually,
to save up $50,000 in 8 years ?
C _______ What amount will result if $8600 is invested for 6 years at 10%, compounded
D _______ Find the interest that will be earned if $6300 is invested for 3 years at 10%, compounded
E _______ Jake Werkheiser qualifies to invest $2000 in an IRA each April 15 for the next ten years.
If he makes these investments, and if the certificates pay 12%, compounded annually,
how much will he have at the end of the ten years ?
F _______ How much will have to be invested at the end of each year at 12%, compounded annually,
to save up $30,000 in 6 years ?
G _______ How long (in years) would $600 have to be invested at 8%, compounded continuously, to
amount to $970?
H _______ Jane Adele deposits $500 in an account at the beginning of each 3-month period for 9
years. If the account pays interest at the rate of 8%, compounded quarterly, how much
will she have in her account ?
I _______ Find the interest that will result if $8000 is invested at 7%, compounded continuously, for
J _______ A house is rented for $900 per quarter, with each quarter’s rent payable in advance. If
money is worth 8%, compounded quarterly, and the rent is deposited in an account, what
is the future value of the rent for one year ?
K _______ Find the future value if $8000 is invested for 10 years at 12%, compounded annually.
L _______ John Fare purchased $10,000 worth of equipment by making a $2000 down payment and
promising to pay the remainder of the cost in semiannual payments over the next 4 years.
If the interest rate on the debt is 10%, compounded semiannually, what are the payments ?
M _______ On his 48th birthday, a man wants to set aside enough money to provide an income of
$300 per month, at the end of each month, from his 60th birthday to his 65th birthday. If
he earns 6%, compounded monthly, on his money, how much will this supplemental
retirement plan cost him on his 48th birthday ?
N _______ A man buys a house for $75,000. He makes a $25,000 down payment and repays the
rest of the debt with semiannual payments over the next 10 years. If the interest rate on
the debt is 12%, compounded semiannually, what are the payments ?
O _______ A grateful alumna wishes to provide a scholarship of $2000 per year for 5 years to her
alma mater, with the first scholarship awarded on her 60th birthday. If money is worth
6%, compounded annually, how much money must she donate on her 50th birthday ?
P _______ Sam deposits $500 at the end of every 6 months into an account that pays 8%,
compounded semiannually. How much will he have at the end of 8 years ?
Q _______ The Weidmans want to save $20,000 in two years for a down payment on a house. If
they make monthly deposits into an account paying 12%, compounded monthly, what size
payments are required to meet their goal ?
R _______ A house worth $160,000 twenty years ago has increased in value by 4% each year
because of inflation. What is its worth today ?
S _______ A debt of $10,000 is to be amortized with 10 equal quarterly payments. If the interest
rate is 6%, compounded quarterly, what is the periodic payment?
T _______ Suppose a state lottery prize of $5 million is to be paid in 20 payments of $250,000 each
at the end of the next 20 years. If money is worth 10%, compounded annually, what is
the present value of the prize ?
A Simple interest ;；A，P1？rt
AB Simple interest P，1？rt
nC Compound interest ;；A，P1？i
mr，~D Effective rate r，1？？1(?Em；?
AP，E Compound interest n;；1？i
rtA，PeF Continuous compounding
AG Continuous compounding P，rte
na(r？1S，r！1H Sum of terms nr？1
n，?？i？;；11S，RI Ordinary annuity ：?i；(
n？1，?;；1？i？1S，R？RJ Annuity due ：?i；(
？n，?i？？1;；1PR，K Ordinary annuity ：?i；(
，?iRPL Amortization ， ：?？n;；11i？？；(
，?iRSM Sinking fund ， ：?n;；i1？？1；(1/15/2015 3