1. 5 pts. Let's explore more on simple interest. In class, we looked at simple interest as a fixed fee earned per year on your investment. Simple interest can also be calculated based on a percentage of the initial balance. Consider the following two situations: 1. Vou make a $1000 investment into an account that earns 2% simple interest annually. 2. Vou borrow $1000 from a bank that charges a simple interest of 2% annually. Part A: Investing In a Simple Interest Amount 1. Calculate the amount of interest you will earn each year if you deposit $1000 into an account that earns 2% simple interest per year. 2. Keeping in mind that simple interest is calculated based on the initial deposit, does the amount of simple interest earned change from vearto year? 3. Complete the chart below. Number of years (t) Interest (in dollars) Total Balance (B) (initial investment + total interest) Initial Deposit 4. Calculate the absolute change from year 1 to year 2. Then from year 2 to year 3. Then from year 3 to 1. (9.7.1) 3 pts. Compound interest computations. year 4. What do you notice? If you invest $1500 at 7% interest compounded every year, how much will you have at the end of 10 years? 15 years? 20 years? Use the formula for exponential growth. 5' Write an equation for this situation 6. What type of equation is this? 7. What statement can you write regarding this type of equation and absolute change? 3. (9.7.6) 2 pts. The pawn shop business model. On April 9, 2011 The New York Times reported on a pawn shop that opened in an exBlockbuster store: The borrowers are given 60 days to pay back the loan, and La Familia charges a 20 percent interest rate per month. (So for a $100 loan, the borrower would need to pay back $140 after 60 days.) Part 3: Taking out a Simple Interest Loan 3, Explain why 20% interest per month on a $100 loan for two months would actually require repayment 1. Now, instead of investing your $1000 into a savings account, you are taking out a $1000 loan that of a little more than $140. charges a simple interest rate of 2% annually, Calculate the amount of interest you will pay on this loan for one year. 2. Keeping in mind that simple interest is calculated based on the Inltlal loan amount, does the amount of simple interest paid change from year to year? b. What is the annual interest rate when this business lends money? 3. If this is a 5 year loan, calculate the amount of interest you will owe for the total ofthose 5 years. 4. Calculate the total amount of money you will need to pay back for this 5 year loan