a$.$ What does the term compounding mean?

b$.$ Let's say you want to know how much money you will have accumulated in your bank account after $4$ years, if you deposit all $$5,000$ of your high$-$school graduation gifts into an account that pays a fixed interest rate of $5\%$ per year. You leave the money untouched for all four of your college years.

c$.$ Let's say that you have seen your dream house, which is currently listed at $$300,000,$ but unfortunately, you are not in a position to buy it right away and will have to wait at least another $5$ years before you will be able to afford it$.$ If house values are appreciating at the average annual rate of inflation of $5\%,$ how much will a similar house cost after $5$ years?

d$.$ First Global Bank offers a certificate of deposit with an option to select your own investment period. Jonathan has $$26,000$ for his $CD$ investment. If the bank

$1$

is offering a $4\mathrm{.}75\%$ interest rate, how much will the CD be worth at maturity if Jonathan picks a:

i$.$ Two$-$year investment period

ii$.$ Five$-$year investment period

iii. Eight$-$year investment period

e$.$ Fill the present values for the following table, using the present value formula.

$\backslash$table$[[$Future Values,Interest Rate,$\backslash$table$[[$Number of Periods$],[$Present Value$]]],[$$$900\mathrm{.}00,1\mathrm{.}25\%,5],[$$$80,000\mathrm{.}00,3\mathrm{.}50\%,30],[$$$350,000,9\mathrm{.}60\%,20],[$$$26,981\mathrm{.}75,2\mathrm{.}75\%,15]]$

a$.$ What does the term compounding mean?

b$.$ Let's say you want to know how much money you will have accumulated in your bank account after $4$ years, if you deposit all $$5,000$ of your high$-$school graduation gifts into an account that pays a fixed interest rate of $5\%$ per year. You leave the money untouched for all four of your college years.

c$.$ Let's say that you have seen your dream house, which is currently listed at $$300,000,$ but unfortunately, you are not in a position to buy it right away and will have to wait at least another $5$ years before you will be able to afford it$.$ If house values are appreciating at the average annual rate of inflation of $5\%,$ how much will a similar house cost after $5$ years?

d$.$ First Global Bank offers a certificate of deposit with an option to select your own investment period. Jonathan has $$26,000$ for his $CD$ investment. If the bank

$1$

is offering a $4\mathrm{.}75\%$ interest rate, how much will the CD be worth at maturity if Jonathan picks a:

i$.$ Two$-$year investment period

ii$.$ Five$-$year investment period

iii. Eight$-$year investment period

e$.$ Fill the present values for the following table, using the present value formula.

$\backslash$table$[[$Future Values,Interest Rate,$\backslash$table$[[$Number of Periods$],[$Present Value$]]],[$$$900\mathrm{.}00,1\mathrm{.}25\%,5],[$$$80,000\mathrm{.}00,3\mathrm{.}50\%,30],[$$$350,000,9\mathrm{.}60\%,20],[$$$26,981\mathrm{.}75,2\mathrm{.}75\%,15]]$