sec1.4 (2).notebook February 17, 2016 - Mrs. Laura Rogers ... · sec1.4 (2).notebook 7 February 17,...
Transcript of sec1.4 (2).notebook February 17, 2016 - Mrs. Laura Rogers ... · sec1.4 (2).notebook 7 February 17,...
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Roger invests $8000 at 6% interest rate, compounded semiannually. Estimate the doubling time of the investment
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How long
http://mackenziefinancial.com/en/pub/tools/calculators/index.shtml
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Generally speaking, pick investments with compound interest rather than simple interest.
NOTE: Longer terms, higher interest rates and more frequent compounding results in a greater future value.
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Present Value, P, of an investment earning compound interest can be calculated using the formula:
Section 1.4 Compound Interest: Present Value
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#1. Eva invested in a registered education savings plan (RESP). She would like the investment to grow to $14 000. The investment earns 6.8% interest compounded semiannually for 10 years.
a) How much does she need to invest now to reach her goal?
b) How much interest will be earned?
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Jan, who is 25 years old, would like to have $100 000 in a Registered Retirement Savings Plan (RRSP) at age 55 when she retires. The RRSP pays 5% per year compounded annually.
a) How much money will she have to invest now in order to have her desired amount?
b) How much interest is earned?
c) How much money will she have to invest now in order to have her desired amount, if the interest in compounded quarterly?
A=
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Laura has invested $15 500 in a Registered Education Savings Plan (RESP). She wants her investment to grow to at least $50 000 by the time her newborn enters university, in 18 years.
What is the interest rate, compounded annually, will result in a future value of $50 000? Round answer to two decimal places.
A=
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Paul is planning to buy a 4wheeler in 3 years. He intends to spend $12 000. He has $10 000 invest in an account that compounds interest monthly. What is the rate of interest of this investment? Round to nearest whole number.
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Your turn: Try it
Lawson invests $12 000 into an investment that is paid interest compounded semi annually. Lawson wants to have $60 000 in his investment in 20 years. What is the interest rate? (round to one decimal written as a %)
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David has a savings account that earns interest at 2.3 %, semiannually. He has not made any deposits or withdrawals in the past year. If there is $2305.40 in the account today, how much interest has the account earned in the past year?
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Homework Problems
SEE blog or homework binder for answers