Application of Compound Interest

A bank gives you two options to choose from for your investments:

Option A: 8% annual interest rate compounded yearly; and

Option B: 7.9% annual interest rate compounded quarterly.

Decide which is the better investment at the end of 2 years.

• Option A

• Option B

Christopher and Jennifer are establishing a fund for their son's college education. What lump sum must they deposit in an account that gives 8% annual interest rate, compounded monthly, in order for them to have $60,000 in the fund at the end of 10 years?

• $28,331.41

• $31,607.41

• $29,351.41

• $27,031.41

Ian purchased a bond for $3200, and ten months later he sold it for 3700. What annual rate would he have to earn in a savings account compounded monthly, to earn the same money on his investment?

• 19.05%

• 19.55%

• 17.55%

• 18.3%

Sarah purchased a bond for a museum valued at $8,000 for $2,400. If the bond pays 5.5% annual interest compounded monthly, how long must she hold it until it reaches its full face value?

• 20.94 years

• 21.94 years

• 23..94 years

• 19.94 years

Find the accumulated value of an investment of $7000 at 8% compounded continuously for 3 years. Use  $A\ =\ Pe^{rt}$  

• $8998.74

• $8898.74

• $8817.98

• $8680.00

$6149 is deposited into a savings account at 10% interest by Joan, compounded weekly. To the nearest year, how long will it take for Joan's account balance to reach $1,000,000?

• 46 years

• 71 years

• 36 years

• 51 years

Brandon just put $4190 in a CD that is expected to earn 17% compounded monthly, and $8773 in a savings account that is expected to earn 3% compounded monthtly. Determine when, to the nearest year, the values of Brandon's two investments will be the same.

• 5 years

• 7 years

• 2 years

• 4 years

Jason has money in an account at 7% interest, compounded monthly. To the nearest year, how long will it take for Jason's money to double?

• 14 years

• 8 years

• 10 years

• 6 years

Jennilyn has money in an account at 10% interest, compounded montly. To the nearest year, how long will it take for her money to triple?

• 7 years

• 11 years

• 15 years

• 9 years

Use the compound interest formula to compute the future value of the investment. if $1640 invested at 6.6% compounded annually for 17 years by Rania, what is the value of Rania's investment?

• $4559.94

• $4860.90

• $3480.08

• $3371.84