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# A ________(p 354 # 1) Find the amount that will accrue if

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A ________(p 354 # 1) Find the amount that will accrue if

Problem identification practice

Math 118 ___________________

Dr Sandifer

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

years ?

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

semiannually ?

D _______ Find the interest that will be earned if \$6300 is invested for 3 years at 10%, compounded

annually.

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

8 years.

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 ?

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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 ?

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Formula sheet

A Simple interest ;；AP1rt

AB Simple interest P1rt

nC Compound interest ;；AP1i

mr~D Effective rate r11(?Em?

APE Compound interest n;；1i

rtAPeF Continuous compounding

AG Continuous compounding Prte

na(r1Sr1H Sum of terms nr1

n?i;；11SRI Ordinary annuity ?i(

n1?;；1i1SRRJ Annuity due ?i(

n?i1;；1PRK Ordinary annuity ?i(

?iRPL Amortization ?n;；11i(

?iRSM Sinking fund ?n;；i11(1/15/2015 3

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