l. A student deposits $1,000 in a savings account with an interest!ate of 4.25%.

Question

l. A student deposits $1,000 in a savings account with an interest!ate of 4.25%. Ilow much interest will be gained at the end of one year? is 4.25 a. $43 b. $23 c. $59 d. $4 You borrow S2.000 from a bank at 9% interest. How much money would you save if the interest were simple interest rather than compound interest? Figure the amounts for 4 years. 2. P: 2,000 a. $196 b. $103 C. $720 d. $500 A small business owner deposits $3,000 in the bank. At the end of one year, he withdraws the whole amount of $3,200. What was his rate of return? 3. 9% 1300 a, b. d.290 4. How much money should be deposited, for the next 6 years, to have $8,000 at the end of the 6 years at an interest rate of 8% per year? a. $2.142 b. $1,091 $863 d. $392 5. A company guarantees that all new employees will get a bonus of $700 in year 1 and amounts increasing by $50 each year. What is the present worth of the bonuses for 6 years. if the interest rates 6% per year? a. $1.600 b. $5,500 c. $7,150 d. $4.015 6. You plan to invest your bonus (at the end of this year) of $3,500 into a business that is guaranteed to make 12% per year, what will be the present worth of 3 years' worth of investments if the amount of your bonus increases by 10% each year? a. $9.200 b $6.100 c. $8.400 d. $12.200

Explanation / Answer

Ans 1)

If $1000 invested in deposit with interest rate of 4.25% then interest earned will be calculated as below

1000(1.0425)-1000=$42.5

Option A is correct

Ans 3)

Rate of Return-(End Amount-Begining Amount)/Begining Amount)*100=(3200-3000)/3000*100=6.67%

Approximately 7%

then option C is correct

Ans 2)

Interest Component if Compounding for 4 years 2000(1.09)^4-2000=823.16

Interest Component if Simple for 4 years 2000(1+4(9%))-2000=720

Difference is 823.16-720=103.16 hence 103 approximaltely

Option b is correct

Ans 4)

X/(1.08)+X/(1.08)^2+X/(1.08)^3+X/(1.08)^4+X/(1.08)^5+X/(1.08)^6=8000

X*4.623=8000

X=8000/4.623

Ans 5)

PW of Bouns for 6 years=700/1.06+750/1.06^2+800/1.06^3+850/1.06^4+900/1.06^5+950/1.06^6=$4015.09

Option D Is correct

Ans 6)

(3500/1.12)+(3500(1.1)/1.12^2)+(3500(1.1)^2/1.12^3)=$9208.6 That is approximtely $9200

Option A is correct

..(please check for ans 4 i am not sure about the options given they seem to be incorrect)

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