1. Determine the amount earned on $11 800 at 8.4% per year, compounded quarterly, for 14...

   

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1. Determine the amount earned on $11 800 at 8.4% per year, compounded quarterly, for 14 years. P = i = n = 2. It is Jerry's 14th birthday and his parents plan to invest some money so that they will have $17 000 on Jerry's 18th birthday for his post-secondary education. They invest in an RESP that pays 8.6% per year, compounded quarterly. How much money must Jerry's parents invest now to reach their goal? 3. Mona needs a loan of $7500 for 6 years. a. How much interest will each plan charge? Plan A: 10% per year, compounded semi-annually Plan B: 8.1% per year, compounded quarterly Plan A Plan B b. Calculate the difference in the amount of interest between the two plans. Which plan will require her to pay the least amount of interest? Mona should select: Plan A Plan B because it charges $ MBF 3C1 - Personal Finance Assignment less interest. 4. Without calculating, explain which investment is better and why for a principal investment of $100: an investment offering a 5% simple interest rate vs. a 5% rate that is compounded monthly. 5. The chart below demonstrates the growth of an investment fund over 50 years. Answer the following questions by studying the data in the chart. Year Beginning Balance 1 $100.00 $105.00 5% Interest Ending Balance + 0.05 $100.00 $5.00 = 2 $105.00 + 0.05 $105.00 $5.25 $110.25 3 $110.25 . 0.05 $110.25-$5.51 $115.76 4 $115.76 . 0.05 $115.76 = $5.79 = $121.55 5 $121.55 + 0.05 $121.55 $6.08 $127.63 50 $1,092.13 0.05 $1,092.13 $54.61 = $1,146.74 This chart represents, simple/compound interest. 1. Determine the amount earned on $11 800 at 8.4% per year, compounded quarterly, for 14 years. P = i = n = 2. It is Jerry's 14th birthday and his parents plan to invest some money so that they will have $17 000 on Jerry's 18th birthday for his post-secondary education. They invest in an RESP that pays 8.6% per year, compounded quarterly. How much money must Jerry's parents invest now to reach their goal? 3. Mona needs a loan of $7500 for 6 years. a. How much interest will each plan charge? Plan A: 10% per year, compounded semi-annually Plan B: 8.1% per year, compounded quarterly Plan A Plan B b. Calculate the difference in the amount of interest between the two plans. Which plan will require her to pay the least amount of interest? Mona should select: Plan A Plan B because it charges $ MBF 3C1 - Personal Finance Assignment less interest. 4. Without calculating, explain which investment is better and why for a principal investment of $100: an investment offering a 5% simple interest rate vs. a 5% rate that is compounded monthly. 5. The chart below demonstrates the growth of an investment fund over 50 years. Answer the following questions by studying the data in the chart. Year Beginning Balance 1 $100.00 $105.00 5% Interest Ending Balance + 0.05 $100.00 $5.00 = 2 $105.00 + 0.05 $105.00 $5.25 $110.25 3 $110.25 . 0.05 $110.25-$5.51 $115.76 4 $115.76 . 0.05 $115.76 = $5.79 = $121.55 5 $121.55 + 0.05 $121.55 $6.08 $127.63 50 $1,092.13 0.05 $1,092.13 $54.61 = $1,146.74 This chart represents, simple/compound interest.