# Practice Quiz Compound Interest [with answers] ```Name: _______________________________
Period: ____
Precalculus H/GT
Practice Problems: Compound Interest
1. What is the best way to invest \$5000 for 2 years?
1
Option I: 10 % simple interest
4
Option II: 10% compounded annually
7
Option III: 9 % compounded monthly
8
Option IV: 9.75% compound continuously
2. Suppose you need \$20000 in 15 years. How much do you have to invest now in an account that pays:
(a) 8.5% interest compounded annually?
(b) 8.5% interest compounded monthly?
3. Mei purchased her house in 1972 for \$35000. If the value of real estate increases at a rate of 15% per
year, when, to the nearest year, will her house be worth \$300000?
4. At what interest rate would you have to invest in order to triple your investment in 20 years if:
(a) Simple interest
(b) Interest rate is compounded quarterly
(c) Interest rate is compounded continuously
5. A \$125000 piece of heavy machinery is depreciating at 8% per year.
(a) How much is it worth after 5 years?
(b) How much is it worth after 7 years?
(c) How long will it take to be worth less than \$50000?