Name: ______________________________ Date: _________________________ Per: __________

Pre Calculus 5.6 Compound Interest Mrs. Torales

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1. An amount of $1uu is incieaseu by 1S%, anu then the new amount is incieaseu by1S%. Is this the
same as an oveiall inciease of Su%.








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2. Suppose that $2uuu is investeu at 7.S % inteiest compounueu annually. Bow many yeais will it
take foi the money to uouble










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Suppose that $1uuu is placeu in a savings account at 1u% pei annum. Bow much is in the account
at the enu of 1 yeai if the inteiest is:
(a)compounueu once each yeai(n=1); anu (b)compounueu quaiteily (n=4).











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>4 A bank offeis a nominal inteiest iate of 6% pei annum foi ceitain accounts. Compute the effective
iate if inteiest is compounueu monthly.
Question 1


Foi a xeu peiiou of time (say, one yeai), uoes moie anu moie fiequent compounuing of inteiest
continue to yielu gieatei anu gieatei amounts.


Question 2
Is theie a limit on how much money can accumulate in a yeai when inteiest is compounueu moie
anu moie fiequently.



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S. A piincipal of $16uu is placeu in a savings
account at S% pei annum compounueu continuously. Assuming no subsequent withuiawals oi
ueposits, when will the balance ieach $24uu.









6. A piincipal of $1uu is uepositeu in Account 1 at 6% pei annum, compounueu continuously. At the
same time, anothei piincipal of $1uu is uepositeu in Account 2 at6% pei annum, compounueu
only once a yeai. 0se a giaphing utility to ueteimine how long it will take until the amount in
Account 1 exceeus that in Account 2 by(atleast) $1u.







7. Nominal anu Effective Rates 0nuei Continuous Compounuing
(a)uiven a nominal iate of 8% pei annum compounueu continuously, compute the effective
inteiest iate.








(b)uiven an effective iate of 8% pei annum, compute the nominal iate compounueu continuously.