chapter 4

1) Suppose you start saving today for a $20,000 down payment that you plan to make on a house in 10 years. Assume that you make no deposits into the account after your initial deposit. The account has quarterly compounding and an APR of 3%. How much would you need to deposit now to reach your $20,000 goal in 10 years?

2) You have a choice between going to an in-state college where you would pay $6000 per year for tuition and an out-of-state college where the tuition is $12,000 per year. The cost of living is higher at the in-state college, where you can expect to pay $1000 per month in rent, compared to $600 per month at the other college. You will pay $2000 per year to travel back and forth from the out-of-state college. Assuming all other factors are equal, which is the less expensive choice on an annual basis? Find the cost of each college for one year.

3) Use the compound interest formula to determine the accumulated balance after the stated period. Assume that interest is compounded annually. $2000 is invested at an APR of 1.8% for 2 years

4) Use the compound interest formula for compounding more than once a year to determine the accumulated balance after the stated period. $10,000 deposit at an APR of 4% with semiannual compounding for 12 years

5) Use the compound interest formula for compounding more than once a year to determine the accumulated balance after the stated period. $2500 deposit at an APR of 4% with monthly compounding for 6 years