12 END-OF-CHAPTER PROBLEMS connect Check figures for odd-numbered problems in Appendix B. Name . Date DRILL PROBLEMS Complete the following without using Table 12.1 (round to the nearest cent for each calculation) and then check your answer by Table 12.1 (check will be off due to rounding). LU 12-1(2) Rate of Time compound Principal (years) interest Compounded Periods Rate Total amount Total interest 12-1. $575 4% Quarterly Complete the following using compound future value Table 12.1 or the Business Math Handbook: LU 12-1(2) Time Principal Rate Compounded Amount Interest 12-2. 12 years $15,000 3-% Annually 12-3. 6 months $15,000 6% Semiannually 12-4. 2 years $15,000 8% Quarterly Calculate the effective rate (APY) of interest for 1 year. LU 12-1(3) 12-5. Principal: $15,500 Interest rate: 6% Compounded quarterly Effective rate (APY): 12-6. Using Table 12.2, calculate what $700 would grow to at 6% per year compounded daily for 7 years. LU 12-1(3) Complete the following using present value Table 12.3 or the present value table in the Business Math Handbook. LU 12-2(2) Amount On PV Table 12.3 PV PV of amount desired at Length Period Rate factor desired at end of period of time Rate Compounded used used used end of period excel 12-7. $6,000 8 years 3% Semiannually excel 12-8. $8,900 4 years 6% Monthly excel 12-9. $17,600 7 years 2% Quarterly 333eXcel 12-10. $20,000 20 years 8% Annually 12-11. Check your answer in Problem 12-9 by the compound value Table 12. 1. The answer will be off due to rounding LU 12-2(3) WORD PROBLEMS 12-12. Sam Long anticipates he will need approximately $225,000 in 15 years to cover his 3-year-old daughter's college bills for a 4-year degree. How much would he have to invest today at an interest rate of 8% com- My Money pounded semiannually? LU 12-2(2) 12-13. Lynn Ally, owner of a local Subway shop, loaned $40,000 to Pete Hall to help him open a Subway franchise. Pete plans to repay Lynn at the end of 8 years with 6% interest compounded semiannually. How much will Lynn receive at the end of 8 years? LU 12-1(2) 12-14. Molly Hamilton deposited $50,000 at Bank of America at 8% interest compounded quarterly. What is the effective rate (APY) to the nearest hundredth percent? LU 12-1(3) excel 12-15. Melvin Indecision has difficulty deciding whether to put his savings in Mystic Bank or Four Rivers Bank. Mystic offers 10% interest compounded semiannually. Four Rivers offers 8% interest compounded quarterly Melvin has $10,000 to invest. He expects to withdraw the money at the end of 4 years. Which bank gives Melvin the better deal? Check your answer. LU 12-1(3) My Money 12-16. Lee Holmes deposited $15,000 in a new savings account at 9% interest compounded semiannually. At the beginning of year 4, Lee deposits an additional $40,000 at 9% interest compounded semiannually. At the end of 6 years, what is the balance in Lee's account? LU 12-1(2) excel 12-17. Lee Wills loaned Audrey Chin $16,000 to open Snip Its Hair Salon. After 6 years, Audrey will repay Lee with 8% interest compounded quarterly. How much will Lee receive at the end of 6 years? LU 12-1(2) 12-18. Jazelle Momba wants to visit her family in Zimbabwe in 2028, which is 6 years from now. She knows that it will cost approximately $8,000 including flight costs, on-the-ground costs, and extra spending money to stay for 4 months. If she opens an account that compounds interest at 4% semiannually, how much does she need to deposit today to cover the total cost of her visit? LU 12-1(2) GLOBAL 12-19. To protect her savings against further inflation and to help her prepare for a healthy financial future, Hanna Lind deposits $7,000 in an investment account earning 6% interest compounded quarterly. How much will Hanna have in her account in 10 years? (Use tables in the Business Math Handbook.) LU 12-1(2) My Money