MCF3C Compound Interest Assignment
Name _____________________________
1. Martha invested $600 in an account earning 7% simple interest for 10
years. How much interest did Martha earn?
(5)
2. After 48 months, Jillian’s original investment of $4000 had earned her
$250 in interest. What rate of simple interest did her investment earn?
(6)
3. Complete the charts and graphs for the following information. (10)
a) $3000 is invested at 10% simple interest for 8 years. y
Year
Start Amount
Interest
Total Amount
0
1
2
3
4
5
6
7
8
3000
3000
3300
0
300
3000
3300
5400
5200
5000
4800
4600
4400
4200
4000
3800
3600
3400
3200
3000
0
2
4
6
8
6
8
b) On the grid above, construct a graph to display the total amount of the
investment over 8 years.
c) $3000 is invested at 10% interest compounded annually for 8 years.
Year
0
1
2
3
4
5
6
7
8
Principal
3000
3000
3300
Interest
0
300
Total amount
3000
3300
y
7000
6800
6400
6000
5600
5200
4800
4400
4000
3600
3200
3000
0
2
4
d) On the grid above, construct a graph to display the total amount of the
investment over 8 years.
e) Compare you two graphs. What do you notice about the way simple interest
grows compared to compound interest?
Use the Compound Interest Formula
3. $4000 is invested at 6% compounded semi-annually for 8 years. How
much will it be worth at the end of the term?
(5)
4. Sarah needs $25 000 for a down payment on a house in 2 years. How
much does she have to invest today into an account that earns 12%
compounded quarterly?
(5)
Use the TVM solver for Problem 5
5. Harold invests $800 at 6.7% compounded monthly. How much will his
investment be worth in 10 years?
(5)
PVPMTFVRatePeriods-
Solve this page however you like.
6. If the interest rate and compounding frequency remain constant it always
take the same amount of time for the principal to double.
a. Use examples to prove this is true. (4)
b. Use the compound interest formula to show why this makes sense.
(2)
7. If Bobby invests $300 today at 2.8% compounded quarterly, how long will
it take to reach $1000? (5)