MBF 3C
Simple and Compound Interest - Test Review
Show your work for each question by first writing the appropriate formula, then showing calculations and
stating your final answer in the space given.
1. a) Alana invests $6000 at 5% simple interest for 4 years. What amount will she have after 4 years?
A = ___________
b) If Alana invests the $6000 at 5% per year, compounded annually, what amount will she have after 4 years?
A = __________
c) How much more money does Alana make by having compound interest?
$ __________
2. Brett has $10 000 to invest. He invests it at 4% per year, compounded semi-annually. What will be the total value of
his investment in 10 years?
A = __________
3. Ben wants to make an investment so that, after 8 years at 6% per year, compounded quarterly, he will have $15000
to buy a car. How much does he need to invest today?
P = __________
4. You borrow $5000 for college from the bank. It is a 3 year loan with an interest rate of 6 % per year, compounded
monthly. What amount will you have to pay the bank at the end of the loan?
A = __________
How much interest did the loan cost you?
I = _________
5. You put $5000 on your credit card to buy a home theatre system. You are not able to pay for it for 3 years. The
credit card charges you an interest rate of 21% per year, compounded daily. What will you owe the credit card
company at the end of three years?
A = __________
How much interest did the purchase cost you?
6.
I = __________
How much would you need to invest on your 20th birthday at 8% per year, compounded quarterly, to have
$500,000 by your 75th birthday?
P = ___________
7.
How long would it take to double $500 dollars at 12%, compounded?
a) Yearly
8.
b) monthly
What interest rate would allow you to double $200 in 4 years, compounded annually?