4B MAT 143 Practice

What is the difference between simple interest and compound interest? Why do you end up with more money with compound interest? Choose the correct answer below.

• Simple interest is interest paid only on the original investment whereas compound interest is interest paid both on the original investment and on all interest that has been added to the original investment. Since compound interest is calculated based on a larger amount than simple interest, it results in a larger amount of money over time.

• Simple interest is interest paid at a fixed rate over time whereas compound interest fluctuates over time. Since the rates for compound interest are always increasing, it results in a larger amount of money over time compared to simple interest.

• Simple interest is interest paid both on the original investment and on all interest that has been added to the original investment whereas compound interest is interest paid only on the original investment. Since compound interest is calculated based on a smaller amount, it results in a larger amount of money over time.

• Simple interest is interest paid only on 50% of the original investment whereas compound interest is interest paid only on 100% of the original investment. Since compound interest is calculated based on a larger amount than simple interest, it results in a larger amount of money over time.

Tags

CCSS.7.RP.A.3

Use the compound interest formula to compute the balance in the following account after the stated period of time, assuming interest is compounded annually. $7000 invested at an APR of 2.2% for 15 years. The balance in the account after 15 years is $[ ]. (Round to the nearest cent as needed.)

• 9471.72

• 9702.00

• 9600.00

• 9300.25

Use the appropriate compound interest formula to compute the balance in the account after the stated period of time. $2,000 is invested for 14 years with an APR of 4% and monthly compounding. The balance in the account after 14 years is $[ ]. (Round to the nearest cent as needed.)

• 3498.09

• 3500.00

• 3200.50

• 3400.75

Use the formula for continuous compounding to compute the balance in the account after 5 years. A $2000 deposit in an account with an APR of 5%. The balance in the account after 5 years is approximately $_____. (Round to the nearest cent as needed.)

• $2102.50

• $2050.00

• $2568.05

• $2200.00

Suppose you start saving today for a $55,000 down payment that you plan to make on a house in 5 years. Assume that you make no deposits into the account after the initial deposit. For the account described below, how much would you have to deposit now to reach your $55,000 goal in 5 years. An account with daily compounding and an APR of 7%. You should invest $_____. (Do not round until the final answer. Then round to two decimal places as needed.)

• $38,927.12

• $40,000.00

• $38,759.15

• $39,500.00

How long will it take money to triple at an APR of 8.3% compounded annually? It will take _____ years to triple an amount of money earning 8.3% compounded annually. (Round up to the nearest year.)

• 14 years

• 10 years

• 18 years

• 20 years

Tags

CCSS.HSF.LE.A.4

Principal = $500

Interest Rate = 5%

Time = 5 years

What is the interest earned?

• $95

• $125

• $105

• $135

Tags

CCSS.7.RP.A.3

1) Gabby invested $100 into a savings account that earned simple interest at a rate of 1.5%.  She plans to keep the money in the account for the next ten years.  How much would she have in the account at the end of ten years?

• $15
• $115       
• $116.05
• $1,500

Tags

CCSS.7.RP.A.3

When finding Compound Interest in your Finance App in TI, what does n represent?

• time, in years

• the number of compounds per year

• Interest Rate

• time * number of compounds (per year)

Tags

CCSS.HSF-LE.A.1C

When finding compound interest in the Finance App in a TI, what do you type in for P/Y?

• 0

• interest rate

• the number of compounds per year

• the number of years