Homework Assignment: Interest

5.1 Exercise Page 269----------4, 6 and 42

#4
The formula for future amount using simple interest is
A = P ( 1 + rt )
given
P = $1200, r = 0.07, t = 8 months =

8
2
years =
12
3

2
A = 1200 1 + 0.07
3

A = $1256

#6.
We have
A = P ( 1 + rt )
P=

A
1 + rt

A = $3100, r = 0.05, t = 10 months =

10 5
= years
12 6

So we get
3100
P=
5
1 + 0.05
6
P = $2976 is the principal

#42.
The future value using compound interest is given by

nt

A = P 1 +
n
Here we have P = $10, 000, r = 0.1082, n = 4 ( quaterly ) , t = 5.5
We get
0.1082
A = 10000 1 +

A = $17989.33

5.5*4

So $17989.33 will be amount worth today

5.2 Exercise Page 284----------16 and 28

#16
Here we use the annuity formula
n
S ( 1 + i ) 1

FV =
i
0.08
i=
12
S = $100

n = 6 ( 12 ) = 72
We get
0.08 72
100 1 +
1
12

FV =
0.08
12
FV = $9202.53

#28.
We need to find the present value corresponding to an investment of $2400 to $3000 per
month at 8% interest
So we have

For $2400 as per month investment, the present value is

PV =

R 1 (1+ i)

0.08
, n = 30 ( 12 ) = 360
12
0.08 360
2400 1 1 +

12

PV =
0.08
12
PV = $327080.39
R = 2400, i =

For $3000 as per month investment, the present value is

PV =

R 1 (1+ i)

0.08
, n = 30 ( 12 ) = 360
12
0.08 360
3000 1 1 +

12

PV =
0.08
12
PV = $408850.48
R = 3000, i =

So the price range that is to be considered now will be between 327,080.39 and
408,850.48

5.3

Exercise Page 295---------- 6, 20, 30 and 46

#6
The formula is given by
R=

Pi

1 ( 1 + i ) n

0.105
P = 80, 000, i =
, n = 12 ( 30 ) = 360
12
So we get
R=

0.105
80000

12
0.105 360
1 1 +

12

R = $731.79 is Periodic payment

#20.
R=

Pi

1 ( 1 + i ) n

0.12
P = 30, 000, i =
, n = 12 ( 10 ) = 120
12
So we get
R=

0.12
30000

12

0.12 120
1 1 +

12

R = $430.41 is the monthly payment required

#30.
For sin king funds the amount of deposits is
Fi
S=
( 1 + i ) n 1

0.1
F = 20000, i =
, n = 4 ( 3) = 12
4
0.1
20000

S=
0.1 12
1 +
1
4

S = $1449.74
$1449.74 needs to be deposited quaterly

#46
Monthly payment for 15 years term is given by the formula
R=

Pi

1 ( 1 + i ) n

0.06
P = 200, 000, i =
, n = 12 ( 15 ) = 180
12
So we get
R=

0.06
200000

12
0.06 180
1 1 +

12

R = $1687.71 is Periodic payment

However she pays only for 5 years

In 5 years the amount paid = 5 *12 *(1687.71)=101262.60
So the remaining balance = 200000-101262.60 = $98737.40