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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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