Name:_ Chapter F Practice: Word Problems Simple interest nna deposits $2000 into a savings account that earns 2.1% annual simple interest. How long will it take to have $2400 in the account? Present voive or an Aonit? 5. Brian is being offered a "million-dollar" retirement package to be given in $50,000 payments at the end of each of the next 20 years. He is also given the option of accepting a $500,000 lump sum payment now. Interest rates are at 6.8% per year. Which option would have a higher present value for Brian? Why? Compounded 6. Donna placed $1000 into an account earning 5.2% annual interest compounded weekly. How long will it take for her investment to reach $8,000? P=1000 F = 8000 ra.082 M=52 t= ? 8000 - 1000 (+052) Sext 8=(1.001) 52xt in (8) = in (1.001) Sexty in (8)= ln (1.ooldyort in(1.00lxrz in (1.001) x 52 tilo (8) = 2.079442 - 2.019412 = 40.0093 years in(1-GOI)x52 0.0009995)x52 0.041974 2010: Chapter F Practice: Word Problems Fawe value of an anity 7. At the end of each year lake places $3800 into and Individual Retirement ACCO both the original earnings and the interest in the a earnings and the interest in the account are not subject to taxation. If the account has an annual interest rate of 7.4% compounded annua erest rate of 7.4% compounded annually. how much will be in the account at the end of 40 years. ividual Retirement Account (IRA) in which Simere discant 8. Jamie plans to borrow a sum from a bank and signs a note to pay $40,000 to the bank in seven months at 5.5% simple discount. What is the discount and how much does Jamie actually receive from the bank? Future value 9. A corporation creates a sinking fund in order to have $500,000 to replace some machinery in 10 years. How much should be placed into the account at the end of each quarter if the annual interest is 6.4% compounded quarterly? How much interest was earned over the life of the fund? Name: Chapter F Practice: Word Problems Compauode A 10. A stationary company needs to save $40.000 to replace some of their machinery in five years. How much should be placed into an account with a nominal interest rate of 6.8%, compounded quarterly, to reach their goal? Preseot value 11. Jenna purchased a new car for $13,000 and made a $3,000 down payment. She now owes $10,000 on the care which she intends to pay off in 3 years in equal installments each month. She financed her car loan through her credit union, which charges 3.8% interest compounded monthly for new car loans. What must her monthly payment be to successfully pay of the loan in 3 years? Present Value 12. Luke opens up a credit card with an annual interest rate of 24.99% compounded monthly. If Luke has a balance of $1221.24 at the end of January, how much would he need to pay each month to pay off the credit card in six months? How much interest will he pay in the end
