app 3

1. Explain How Compound Interest Works

   Use Future Value Tables or your calculator to complete the requirement below.

   Assume you have $7,300.

   Required:

   Calculate the future value of the $7,300 at 12% compounded quarterly for 5 years. Round your answer to the nearest cent, if rounding is required

2. Use Future Value and Present Value Tables to Apply Compound Interest to Accounting Transactions

   Use Future Value Tables and Present Value Tables, or your calculator, to complete the requirement below.

   Cathy Lumbattis inherited $141,000 from an aunt.

   Required:

   If Cathy Lumbattis decides not to spend her inheritance but to leave the money in her savings account until she retires in 15 years, how much money will she have assuming an annual interest rate of 8%, compounded semiannually? Round your answer to the nearest cent, if rounding is required

3. Use Future Value and Present Value Tables to Apply Compound Interest to Accounting Transactions

   Use Future Value Tables and Present Value Tables, or your calculator, to complete the requirement below.

   LuAnn Bean will receive $8,000 in 7 years.

   Required:

   What is the present value at 7% compounded annually? Round your answer to the nearest cent, if rounding is required.

b)

1. Use Future Value and Present Value Tables to Apply Compound Interest to Accounting Transactions

   Use Future Value Tables and Present Value Tables, or your calculator, to complete the requirement below.

   A bank is willing to lend money at 6% interest, compounded annually.

   Required:

   How much would the bank be willing to loan you in exchange for a payment of $600 4 years from now? Round your answer to the nearest cent

c)

1. Use Future Value and Present Value Tables to Apply Compound Interest to Accounting Transactions

   Use Future Value Tables and Present Value Tables, or your calculator, to complete the requirement below.

   Ed Walker wants to save some money so that he can make a down payment of $2,300 on a car when he graduates from college in 4 years.

   Required:

   If he opens a savings account and earns 3% on his money, compounded annually, how much will he have to invest now? Round your answer to the nearest cent, if rounding is required. $