Exercises: Compound Interest and Annuities

By: Engr. Calaque, Dario Jr.

1. A student deposits ₱1,000 in a savings account that pays interest at the rate of 6% per year
compounded annually. If all the money is allowed to accumulate, how much money will the
student have after 12 years? ₱2012.20
2. A certain sum of money will be deposited in a savings account that pays interest at the rate
of 6% per year compounded annually. If all the money is allowed to accumulate, how much
must be deposited initially so that ₱5000 will have accumulated after 10 years? ₱2792
3. A student plans to deposit ₱600 each year in a savings account, over a period of 10 years.
If the bank pays 6% per year compounded annually, how much money will have accumulated
at the end of the 10-year period? ₱7908.48
4. Suppose that a fixed sum of money, A, will be deposited in a savings account at the end of
each year for 20 years. If the bank pays 6% per year, compounded annually, find A such that
a total of ₱50 000 will be accumulated at the end of the 20-year period. ₱𝟏𝟑𝟓𝟗. 𝟎𝟎
5. An engineer who is about to retire has accumulated ₱50 000 in a savings account that pays
6% per year, compounded annually. Suppose that the engineer wishes to withdraw a fixed
sum of money at the end of each year for 10 years. What is the maximum amount that can be
withdrawn? ₱𝟔𝟕𝟗𝟓
6. An engineer who is planning his retirement has decided that he will have to withdraw ₱10
000 from his savings account at the end of each year. How much money must the engineer
have in the bank at the start of his retirement, if his money earns 6% per year, compounded
annually, and he is planning a 12-year retirement (say 12 annual withdrawals)? ₱𝟖𝟑𝟖𝟑𝟗
7. An engineer is planning for a 15-year retirement. In order to supplement his pension and
offset the anticipated effects of inflation, he intends to withdraw₱5000 at the end of the first
year, and to increase the withdrawal by ₱1000 at the end of each successive year. How much
money must the engineer have in his savings account at the start of his retirement, if money
earns 6% per year, compounded annually? ₱𝟏𝟎𝟔𝟏𝟏𝟔. 𝟓𝟗
8. How much money must initially be deposited in a savings account paying 5% per year,
compounded annually, to provide for ten annual withdrawals that start at ₱6000 and
decrease by ₱500 each year? ₱𝟑𝟎, 𝟓𝟎𝟒. 𝟏𝟗
9. A man has deposited ₱50 000 in a retirement income plan with a local bank. This bank
pays 9% per year, compounded annually, on such deposits. What is the maximum amount
the man can withdraw at the end of each year and still have the funds last for 12 years?
₱𝟔𝟗𝟖𝟐. 𝟓𝟎
10. A man has deposited ₱50 000 in a retirement income plan with a local bank. This bank
pays 8.75 % per year, compounded annually, on such deposits. What is the maximum amount
the man can withdraw at the end of each year and still have the funds last for 12 years?
₱𝟔𝟖𝟗𝟒. 𝟖𝟒