1. Robert deposits $300.00 in a savings account that earns 5% interest compounded annually. Figure 1 shows the compound interest and the final balance for 3 years. Find the compound interest and account balance for year 4 to complete the table.
2. Randall deposits $400 in an account that earns 5% interest compounded annually. Teresa deposits the same amount into an account that earns 5% simple interest. Which account will have a greater balance after 2 years?
A. Teresa's account balance is greater.
B. Randall's account balance is greater.
C. After 2 years, Randall's and Teresa's account balances are equal.
3. Suppose that $9,000 is invested in an account at 6% interest. Find the account balance after 7 years if the interest is compounded annually.
4. A company will need $50,000 in 6 years for a new addition. To meet this goal, the company deposits money in an account today that pays 5% interest compounded annually. Find the amount to the nearest hundred dollars that should be invested to total $50,000 in 6 years.
a. What is the value of a $5,000 investment after 6 years at 4% interest compounded quarterly?
b. How much interest does the investment earn?
6. Reasoning Two bank accounts open on the same day with original deposits of $725. The first account earns 2% interest compounded annually. The second account earns 2% simple interest.
a. What is the balance of the first account after 1 year?
b. What is the balance of the second account after 1 year?
c. Which account will have a greater balance after 1 year?
A. The first account.
B. The second account.
C. They will have the same balance.
7. Writing An investor considers two investment bonds. One $8,000 bond offers 9% interest compounded annually for 10 years. Another $8,000 bond offers 9% interest compounded quarterly for 10 years.
a. How much more interest would the investor earn from the bond with quarterly compounding? Round to the nearest dollar as needed.
b. Explain how to find the interest rate the bond with annual compounding would have to offer so the interest earned would be the same for both bonds.