Download Test Chapter 8 Spring `14

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Name: ________________________
Financial Applications
Clarity of
Part I – Knowledge
Answer each of the following questions in the space provided. Show all of your work.
1. Caitlyn invests $500 for 15 years at 6.4%/a simple interest. How much is her investment
worth at the end of 15 years? (4)
2. Tristen invests $258 at 3.5%/a compounded annually for 10 years. What is the future value
of his investment? (4)
3. Calculate the present value of an investment if in 10 years you will have $10 000. The
interest rate is 4%/a compounded annually. (4)
4. Each year Eric invests $2500 at 8.2%/a compounded annually for 25 years. Determine the
total amount of Eric’s investment. (5)
Part II – Communication
Answer each of the following questions in the space provided. Be sure to use full sentences.
1. Kevin and Louis both want to have $10 000 in 20 years. Kevin can invest at 5%/a
compounded annually and Louis can invest at 4.8%/a compounded monthly. WITHOUT
doing any calculations explain who has to invest more money to reach his goal. (2)
2. What is the difference between a lump sum and an annuity? (2)
3. Lotti invests some money at a fixed rate of simple interest. She uses the function
𝐴(𝑑) = 750 + 27.75𝑑 to calculate how much her investment will be worth after t years.
How much did she invest and what interest rate is she earning? (3)
Part III – Application
Answer each question in the space provided. Show all of your work.
1. Mario borrows $4800 for 8.5 years at a fixed rate of simple interest. At the end of that time,
he owes $8000. What interest rate is he being charged? (6)
2. Dieter deposits $9000 in an account that pays 10%/a compounded quarterly. After three
years, the interest rate changes to 9%/a compounded semi-annually. Calculate the value of
the investment two years after this change. (7)
3. Tia is investing $2500 that she would like to grow to $6000 in 10 years. At what annual
interest rate, compounded quarterly, must Tia invest her money? Round your answer to two
decimal places. (5)
4. Kenny wants to invest $250 every three months at 5.2%/a compounded quarterly. He would
like to have at least $6500 at the end of his investment. For how long will he need to make
regular payments? (7)
5. Emily is investing $128 000 at 7.8%/a compounded monthly. She wants to withdraw an
equal amount from this investment each month for the next 25 years as spending money.
What is the most she can take out each month? (7)