You have $600 and a bank is offering 4.5% interest on deposits.

If you deposit the money in

the bank, how much will you have in one year?

In one year you will have

$ 627 627.

You expect to have $12,000 in one year. A bank is offering loans at 4.5% interest per year. How
much can you borrow today?

Today you can borrow

$ 11483.25

Your cousin is currently 99 years old. She will be going to college in 99 years. Your aunt and
uncle would like to have $110,000 in a savings account to fund her education at that time. If the
account promises to pay a fixed interest rate of 4.4% per year, how much money do they need to
put into the account today to ensure that they will have $110,000 in 99 years?

The amount they need to put away today is

$ 74660.04

You are planning to invest $5,000 in an account earning 66% per year for retirement.

a. If you put the $5,000 in an account at age 23, and withdraw it 33 years later, how much will
you have?
b. If you wait 10 years before making the deposit, so that it stays in the account for only
2323
years, how much will you have at the end?

a. If you put the $5,000 in an account at age 23, and withdraw it 33 years later, how much will
you have? In
33 years you would have

$ 34202.95
(Round to the nearest cent.)

b. If you wait 10 years before making the deposit, so that it stays in the account for only 23 years,
how much will you have at the end?
In 23 years you would have

$ 19098.75
(Round to the nearest cent.)

Calculate the future value of

$3,000 in
a.
Four years at an interest rate of 5 % per year.
b.
Eight years at an interest rate of 5 % per year.
c.
Four years at an interest rate of 10 % per year.
d. Why is the amount of interest earned in part (a) less than half the amount of interest earned in
part (b)?
a.
Four years at an interest rate of 5% per year. The future value of $3,000
in 4 years at an interest rate of 5% per year is

$ 3646.52
(Round to the nearest dollar.)

b.
Eight years at an interest rate of 5 % per year.

The future value of $3,000 in 8 years at an interest rate of 5% per year is

$ 4432.37
(Round to the nearest dollar.)

c.
Four years at an interest rate of 10% per year.
The future value of $3,000 in 4 years at an interest rate of 10 % per year is

$ 4392.30
(Round to the nearest dollar.)

d. Why is the amount of interest earned in part (a) less than half the amount of interest earned in
part (b)?
(Select the best choice below.)

A.
The amount of interest earned in part
(a) is really half of the amount of interest earned in part (b) since in part (b) the money grows for
twice as many years as in part (a).

B.
The interest earned in part (a) is based on a lower effective annual interest rate.

C.
The annual interest rate in part (b) is slightly higher than the rate assumed in part (a). This is
because of compounding.

D.
This results because you earn interest on past interest. Since more interest has been paid
at the end of the time period than at the beginning, the money grows faster.