Chapter 5 Question 1 Simple Interest versus Compound Interest [LO1] First City Bank pays 9 percent simple interest on its savings account balances, whereas Second City Bank pays 9 percent interest compounded annually. If you made a deposit of $7,500 in each bank, how much more money would you earn from your Second City Bank account at the end of eight years? Input area: Interest rate Deposit # of years Output area: Simple interest per year Total simple interest FV with simple interest FV with compound interest Difference Calculating Future Values (L01] For each of the following, compute the future value: Input area: Output area: Future value $ $ Present value 2,328 7,513 74,381 192,050 Years 11 7 14 16 Interest rate 13% 9% 12% 6% 6 $ Calculating Present Values [LO2] For each of the following, compute the present value: Present value Years 13 4 29 40 Interest rate Future value 9% $ 16,832 7% $ 48,318 13% $ 886,073 21% $ 550,164 Calculating Intesest Rates [LO3] Solve for the unknown interest rate in each of the following: Input area: Output area: Interest rate $ Present value 181 335 48,000 40,353 Years 5 17 13 30 Future value 317 1,080 185,382 531,618 Calculating the Number of Periods [LO5] Solve for the unknown number of years in each of the following: Years $ Present value 560 810 18,400 21,500 Interest rate Future value 7% $ 1,389 8% 1,821 9% 289,715 11% 430,258