CHAPTER 7 REVIEW QUESTIONS

1. What is the difference between simple interest and compound interest?

2. Compare simple interest and compound interest in terms of type of growth,

first differences, and their graphs.

3. Seven thousand dollars ($7000) is invested at 6% per year, compounded

quarterly for 5 years. Calculate the final amount. DO NOT USE THE
GRAPHING CALCULATOR.

4. A $4800 debt is due in 4 years, discounted at an interest rate of 10% per

year, compounded semi-annually. Calculate the discounted payment of the
loan today. DO NOT USE THE GRAPHING CALCULATOR.

5. To pay for university tuition, Ethan borrows $6250 from his parents at 3.8%
interest per year, compounded semi-annually. The loan must be paid in full
at the end of 4 years.
a) How much money will Ethan need to repay his parents? DO NOT USE
THE GRAPHING CALCULATOR.
b) How much interest, in dollars, will Ethan pay?

6. Lia invested $3000 at 6% interest per year, compounded monthly, for 5

years. She then invested the money for 3 years earning 8% per year,
compounded quarterly. Calculate the final amount of Lia’s original $3000
investment. DO NOT USE THE GRAPHING CALCULATOR.

7. Write the values that you would enter in the TVM solver of the graphing
calculator to determine how long it would take $5000 to double at 9.2%
interest per year, compounded quarterly.

8. Write the values that you would enter in the TVM solver of the graphing
calculator to determine the interest rate necessary for $5600 to grow to
$8300 in 7 years if interest is compounded monthly.

9. Nayuto has $15125 in a savings account that earns 2% per year,

compounded daily. Write the values that you would enter in the TVM solver
of the graphing calculator to determine the future amount in his account after
3 years.
 SOLUTIONS

3. $9427.99

4. $3248.83

5. a) 7265.63 b) 1015.63

6. $5132.00

7. N=?
I% = 9.2
PV = -5000
PMT = 0
FV = 10000
P/Y = 1
C/Y = 4

8. N =7
I% = ?
PV = -5600
PMT = 0
FV = 8300
P/Y = 1
C/Y = 12

9. N=3
I% = 2
PV = 1525
PMT = 0
FV = ?
P/Y = 1
C/Y = 365