You are going to receive 10 annual payments. The first payment which is equal to $500 will be
paid one year from now, and the annual payments grow by 2 percent per year. How much will
you have in your account at the end of year 10, if the interest rate is 6% Effective Annual Rate.
Choose the closest answer.
A. 3,991.4
B. 7,148.1
C. 8,127.5
D. 9,879.5
PV =
500
0.06−0.02
1+.02 10
) )
1+0.06
𝑥 (1 − (
= 12,500 x 0.31932 = 3991.5
FV = 3991.5 (1+0.06)10 = 7,148.16
Professor Scholes just borrowed $125,000 from a bank to buy his favorite car. The bank has
agreed to loan him the money at a Quoted Rate of 6% compounded monthly for 60 months (first
payment starts one month from now). Based on this information, how much principal will he
repay in the 51st month of the loan? Please round your final answer to the nearest dollar?
A. $1,171
B. $2,006
C. $2,021
D. $2,299
This is an amortization problem.
1st you need to find payment
N = 60
C/Y = 12
I/Y = 6%
END
PV = 125,000
FV = 0
P/Y = 12
CPT PMT = -2,416.6
Then you need to use the financial calculator to find the principal paid.
One of the tutorials has amortization problem where the TA must have shown how to figure out
amortization schedule using financial calculator. In case you missed that here is a YouTube link
below:
https://www.youtube.com/watch?v=1MNHUUvgKfE
The final value should be 2,299.
Your bank account pays a quoted interest rate of 5 percent, but interest is compounded
daily (on a 365-day basis). Your plan is to deposit $600 into the account today. You also
plan to deposit $800 into the account at the end of each of the next three years. How
much will you have in the account at the end of three years, right after making your final
deposit? Round your answer to the nearest dollar.
A. $3,222
B. $3,525
C. $3,716
D. $3,824
N=3
I/Y = 5
PV = 600
PMT = 0
PV = 0
PMT = 800
P/Y = 1
C/Y = 365
END
CPT FV = 697.09
N=3
I/Y = 5
P/Y = 1
C/Y = 365
CPT FV = 2,525.14
FV = 697.09 + 2,525.14 = 3,222.23
You invested $2,000 at 5 percent compounded annually. Determine how much interest
was earned in the fifth year (from beginning of year 5 to the end of year 5). (Round your
answer to two decimals.)
A. $100.00
B. $121.55
END
C. $500.00
D. $552.56
2000 x (1.05)5 = 2552.56
2000 x (1.05)4 = 2431.01
Interest earned in 5th year = 2,552.56 – 2,431.01 = 121.55