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Compound Interest

Lucia invests $5000 at 4.5% compound interest annually. After 7 years, her investment is worth $6804.31. Riya invests $30,000 at 2.5% compound interest annually. After 7 years, her investment is worth $35,661. Beth invests $2000 at 2% compound interest annually. After 5 years, her investment has increased 10.4% to $2208.16. It takes a minimum of 12 years for Beth's investment to grow to over $2500 at a 2% annual rate. Eisha receives 1.58% simple interest annually to match Meena's return from a 1.5% compound interest investment over 8 years.

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Rikky Rosa
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289 views16 pages

Compound Interest

Lucia invests $5000 at 4.5% compound interest annually. After 7 years, her investment is worth $6804.31. Riya invests $30,000 at 2.5% compound interest annually. After 7 years, her investment is worth $35,661. Beth invests $2000 at 2% compound interest annually. After 5 years, her investment has increased 10.4% to $2208.16. It takes a minimum of 12 years for Beth's investment to grow to over $2500 at a 2% annual rate. Eisha receives 1.58% simple interest annually to match Meena's return from a 1.5% compound interest investment over 8 years.

Uploaded by

Rikky Rosa
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Compound Interest

0580/11/M/J/20
Lucia invests $5000 at a rate of 4.5% per year compound interest.

Calculate the value of her investment at the end of 7 years.


0580/11/M/J/20
Lucia invests $5000 at a rate of 4.5% per year compound interest.

Calculate the value of her investment at the end of 7 years.

5000(1 + 4.5%/1)^(1)(7) = 5000(1.045)^7 = $6804.31

(6800 or 6804 or 6804.3 to 6804.31)


0580/12/F/M/20
Riya invests $30 000 at a rate of 2.5% per year compound interest.

Calculate the value of her investment at the end of 7 years.

Give your answer correct to the nearest dollar.


0580/12/F/M/20
Riya invests $30 000 at a rate of 2.5% per year compound interest.

Calculate the value of her investment at the end of 7 years.

Give your answer correct to the nearest dollar.

30 000(1 + 2.5%/1)^(1)(7) = 30 000(1.025)^7 = $35 660.57


0580/12/F/M/20
Riya invests $30 000 at a rate of 2.5% per year compound interest.

Calculate the value of her investment at the end of 7 years.

Give your answer correct to the nearest dollar.

30 000(1 + 2.5%/1)^(1)(7) = 30 000(1.025)^7 = $35 660.57

= $35 661 (nearest dollar)


0580/42/O/N/20
Beth invests $2000 at a rate of 2% per year compound interest.

(i) Calculate the value of this investment at the end of 5 years.


0580/42/O/N/20
Beth invests $2000 at a rate of 2% per year compound interest.
(i) Calculate the value of this investment at the end of 5 years.
2000(1 + 2%/1)^(1)(5) = 2000(1.02)^5 = $2208.16

(2210 or 2208 or 2208.2, or 2208.16…)


0580/42/O/N/20
Beth invests $2000 at a rate of 2% per year compound interest.

(ii) Calculate the overall percentage increase in the value of Beth’s investment at
the end of 5 years.
0580/42/O/N/20
Beth invests $2000 at a rate of 2% per year compound interest.

(ii) Calculate the overall percentage increase in the value of Beth’s investment at
the end of 5 years.

2208.16 = 2000 + 2000N

N = (2208.16 - 2000)/2000 = 0.10408 = 10.4%

10.4 or 10.5 or 10.40 to 10.41


0580/42/O/N/20
Beth invests $2000 at a rate of 2% per year compound interest.

(iii) Calculate the minimum number of complete years it takes for the value of
Beth’s investment to increase from $2000 to more than $2500.
0580/42/O/N/20
Beth invests $2000 at a rate of 2% per year compound interest.
(iii) Calculate the minimum number of complete years it takes for the value of
Beth’s investment to increase from $2000 to more than $2500.
2000(1 + 2%/1)^(1)(t) = 2000(1.02)^t >= $2500
1.02^t = 2500/2000 = 5/4 = 1.25
T = log 1.25/log 1.02 = 11.26 years
Check:2000(1.02)^11 = 2486.748617
Therefore, round off to 12 COMPLETE years.
0580/42/F/M/16
Meena and Eisha both invest their $6000.

Meena invests her $6000 at a rate of 1.5% per year compound interest.

Eisha invests her $6000 in a bank that pays simple interest.

After 8 years, their investments are worth the same amount.

Calculate the rate of simple interest per year that Eisha received.
0580/42/F/M/16
Meena and Eisha both invest their $6000.

Meena invests her $6000 at a rate of 1.5% per year compound interest.

Eisha invests her $6000 in a bank that pays simple interest.

After 8 years, their investments are worth the same amount.

Calculate the rate of simple interest per year that Eisha received.

6000(1 + 1.5%/1)^(1)(8) = 6000(1.015)^8 = $6758.95552 => Meena


0580/42/F/M/16
Meena and Eisha both invest their $6000.
Meena invests her $6000 at a rate of 1.5% per year compound interest.
Eisha invests her $6000 in a bank that pays simple interest.
After 8 years, their investments are worth the same amount.
Calculate the rate of simple interest per year that Eisha received.
6000(1 + 1.5%/1)^(1)(8) = 6000(1.015)^8 = $6758.95552 => Meena
$6758.95552 - Principal = interest = $758.95552
$758.95552 = 6000(E)(8)
0580/42/F/M/16
Meena and Eisha both invest their $6000.

Meena invests her $6000 at a rate of 1.5% per year compound interest.

Eisha invests her $6000 in a bank that pays simple interest.

After 8 years, their investments are worth the same amount.

Calculate the rate of simple interest per year that Eisha received.

E = 0.01581157

E = 1.58%

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