1.5 Practice Problems

Problem 1.5.1: You deposit $1,000 into a savings account that pays 6% per year compounded annually. Create a 5-year table with the following columns:

Answer: See video.

Problem 1.5.2: Jevonte deposits $25,000 into a savings account that pays 8% per year compounded monthly. Calculate the balance after 15 years assuming no additional deposits are made.

Answer: $82,673

Problem 1.5.3: Imani needs to have $50,000 in 10 years. She has the ability to deposit money into an account that pays 5% compounded annually today. How much should she deposit in order to have the $50,000 in 10 years?

Answer: $30,696

Problem 1.5.4: You deposit $5,500 into an account that pays 7% per year. How much will the account be worth after 20 years if…

1. The interest compounds annually.
2. The interest compounds quarterly.
3. The interest compounds monthly.
4. The interest compounds daily.

Answers: $21,284; $22,035; $22,213; $22,301

Problem 1.5.5: Paval deposits $30,000 into an account. After 15 years, the account is worth $98,430. If the interest compounds quarterly, calculate the annual interest rate.

Answer: 8%

Problem 1.5.6: Seo-yun deposits $1,800 into an account that pays 7.5% compounded daily. How much will the account be worth after 8 years?

Answer: $3,280

Problem 1.5.7: At some point in the past, you deposited $800 into an account which is now worth $2,121. If the account pays 6.5% compounded continuously, how long ago did you make your initial deposit?

Answer: 15.5 years

Problem 1.5.8: In 10 years, Amy knows that she will need to have $35,000. She has the ability to deposit money into an account today, which will pay 4.5% interest compounded annually. How much would she need to deposit in order to have $35,000 in ten years?

Answer: $22,537

Problem 1.5.9: Razan deposits $10,000 into an account. After a certain number of years, the account is worth $25,450. If the account pays 6% compounded monthly, how long has the money been in the account?

Answer: 15.6 years

Problem 1.5.10: When she was born, Andrea had $10,000 deposited into an account for when she turned 21. Now she is 21 and the account is worth $35,143. She is unsure of the interest rate that was being paid on the account but she does know that interest was compounded monthly. What interest rate did the account pay?

Answer: 6%

Problem 1.5.11: If an account pays an annual rate of 8%, use the Rule of 72 to approximate how long it will take for the value of the account to double. Quadruple. Octuple.

Answers: 9 years, 18 years, 27 years

Problem 1.5.12: A standard student credit card charges an annual rate of 24.99% compounded daily. Calculate the effective interest rate for the credit card.

Answers: 28.38%