Math 1090-002
05 December 2011
Section 5.2 Homework
Instructions: Complete the following problems in the space provided. Please
show your work; write down enough so that a classmate could follow the steps
you’ve taken to arrive at the solution.
Simple Interest
4. $10,000 is deposited into a savings account for five years at a simple (annual)
interest rate of 12%.
(a) What is the value of the savings account at the end of the year?
(b) What is the value of the savings account at the end of the 5 year period?
(c) What is the value of the savings account at the halfway point, after two
and one half years have passed?
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Compound Interest
Which of the given options would pay the greatest amount of interest? How
much more would it pay? (Recall that I = S - P.)
16. $25,000 saved for 3 years at an annual interest rate of:
(a) 6%, compounded quarterly
(b) 6.1%, compounded semiannually
18. $50,000 saved for 5 years at an annual interest rate of:
(a) 10%, compounded monthly
(b) 10.2%, compounded quarterly
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21. Compare the value, after 5 years, of $10,000 invested at 4.5% compounded
monthly and the same investment at the same interest rate, compounded daily.
24. How long would it take to double one’s money with a 10% return (i.e. a
10% annual interest rate) compounded monthly?
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30. (pretty morbid, but a good problem) Elaine’s father was executed by lethal
injection in Texas in 1969. Before his death, he had deposited $2000 in a bank
account earning 8% interest, compounded quarterly. Elaine just discovered its
existence. What did she inherit from her late father in 2010?
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