PLATES CE 443 - ECON
1. The ABC Company deposited $100 000 in a bank account on June 15 and withdrew a total of
$115 000 exactly one year later. Compute: (a) the interest which the ABC Company received
from the $100 000 investment, and (b) the annual interest rate which the ABC Company was
paid.
2. What is the annual rate of simple interest if $265 is earned in four months on an investment Of
$15 OOO?
3. Compare the interest earned from an investment of $1000 for 15 years at 10% per annum
simple interest, with the amount of interest that could be earned if these funds were invested
for 15 years at 10°/o per year, compounded annually.
4. At what annual interest rate is $500 one year ago equivalent to $600 today?
5. Suppose that the interest rate is 10% per year, compounded annually. What is the minimum
amount of money that would have to be invested for a two-year period in order to earn $300
in interest?
6. How long would it take for an investor to double his money at 10% interest per year,
compounded annually?
7. Let the inflation rate be 6% per year. If a person deposits $50 000 in a bank account at 9% per
annum simple interest for 10 years, will this effectively protect the purchasing power of the
original principal?
8. An individual wants to have $2000 at the end of three years. How much would the individual
have to invest at a 10% per year interest rate, compounded annually, in order to obtain a net
of $2000 after paying a $250 early withdrawal fee at the end of the third year?
9. At what rate of interest, compounded annually, will an investment triple itself in (a) 8 years? (b)
10years? (c) 12 years?
10. What amount of money is equivalent to receiving $5000 two years from today, if interest is
compounded quarterly at the rate of 2 ½% per quarter?
11. On the first day of the year, a man deposits $1000 in a bank at 8% per year, compounded
annually. He withdraws $80.00 at the end of the first year, $90.00 at the end of the second year,
and the remaining balance at the end of the third year. (a) How much does he withdraw at the
end of the third year? (6) What is his net cash flow? (c) How much better off, in terms of net cash
flow, would he have been if he had not made the withdrawals at the ends of years one and two?
12. A woman deposits $2000 in a savings account that pays interest at 8% per year, compounded
annually. If all the money is allowed to accumulate, how much will she have at the end of (a)
10 years?
13. How much money must be deposited in a savings account so that $5500 can be withdrawn 12
years hence, if the interest rate is 9% per year, compounded annually, and if all the interest is
allowed to accumulate?
14. Suppose that a person deposits $500 in a savings account at the end of each year, starting now,
for the next 12 years. If the bank pays 8% per year, compounded annually, how much money
will accumulate by the end of the 12-year period?
15. On the day his son was born, a father decided to establish a fund for his son's college education.
The father wants the son to be able to withdraw $4000 from the fund on his 18th birthday, again
on his 19th birthday, again on his 20th birthday, and again on his 21st birthday. If the fund earns
interest at 9% per year, compounded annually, how much should the father deposit at the end of
each year, up through the 17th year?
