SIMPLE VERSUS COMPOUND INTEREST

d 13. Jamie deposits $1,000 into an account that pays 4 percent interest compounded
annually. Chris deposits $1,000 into an account that pays 4 percent simple interest.
Both deposits were made today. Which of the following statements are true
concerning
these two accounts
According to the information given, descirpe at least three situations on J and C.
SIMPLE VERSUS COMPOUND INTEREST
d 13. Jamie deposits $1,000 into an account that pays 4 percent interest compounded
annually. Chris deposits $1,000 into an account that pays 4 percent simple interest.
Both deposits were made today. Which of the following statements are true
concerning
these two accounts
!. "t the end of one year, #oth Jamie and Chris will ha$e the same amount in their
accounts.
!!. "t the end of fi$e years, Chris will ha$e more money in his account than Jamie has
in
hers.
!%. "ll else e&ual, Jamie made the #etter in$estment.
a. ! and !! only
#. !!! and !% only
c. !, !!, and !% only
d. !, !!!, and !% only
e. !!, !!!, and !% only
SIMPLE VERSUS COMPOUND INTEREST
c 1'. Beatrice in$ests $1,000 in an account that pays 4 percent simple interest. (ow
much more could she ha$e earned o$er a fi$e)year period if the interest had
compounded
annually
a. $1*.4*
#. $1*.+,
c. $1-.-*
d. $1,.0+
e. $.1.-,
FUTURE VALUE
d .0. What is the future $alue of $.,'+- in$ested for twel$e years at -.* percent
compounded annually
a. $*,'.,.3.
#. $-,0.3.44
c. $-,04+.4*
d. $-,1-*.'-
e. $-,.1'.03
PRESENT VALUE
# .4. /our grandmother in$ested one lump sum 1, years ago at 4..* percent interest.
0oday, she ga$e you the proceeds of that in$estment which totaled $*,*3+.+.. (ow
much did your grandmother originally in$est
a. $.,,00.00
#. $.,,30.30
c. $.,,*0.00
d. $.,,-'.40
e. $.,,,4.+0
INTEREST RATE FOR MULTIPLE PERIODS
d .'. 1orty years ago, your father in$ested $.,*00. 0oday that in$estment is worth
$10,,+.1.
What is the a$erage rate of return your father earned on his in$estment
a. '.*0 percent
#. +.33 percent
c. +.*0 percent
d. +.', percent210, +.13.*0045213404)1
e. +.++ percent
NUMBER OF TIME PERIODS
d 31. Bo# #ought some land costing $14,++0. 0oday that same land is $alued at $**,000.
(ow long has Bo# owned this land if the price of land has #een increasing at -
percent
per year
a. .1.'. years
#. .1.+' years
c. ...03 years
d. ...31 years log2**000314++043log21.0-4
e. ...44 years