This Algebra 2 assignment contains 10 questions where students focus on compound interest. These exercises provide practice for Seeing Structure in Expressions and Linear, Quadratic, & Exponential Models.
Show all work as you apply the compound interest formula. Remember to let your calculator store as many decimal digits as possible in every step. Round your final answer to the nearest cent.
1) Amanda receives a $5000 year-end bonus and deposits it immediately in a 5-year Certificate of Deposit (CD) that pays 2.06% annual interest compounded quarterly. Assuming that Amanda leaves the money in the account, how much will she have at the end of the 5-year period?
2) Meghan receives a $5000 year-end bonus and invests it in an education savings account that averages an annual rate of 4.79% compounded annually. How much will she have in the account at the end of a 5-year period?
3) Michael, who has a credit card debt of $11,387, loses his job and can no longer afford to make the minimum monthly payment on the debt. If the penalty rate for his credit card is 28.99% interest compounded monthly, how much will he owe two years later, when he finally gets a new job?
4) Kevin starts his first job after finishing his college degree. He decides to contribute $200 to a retirement account each month. If the account averages 12.89% interest compounded monthly over the 40-year period until he retires, how much will his first month's contribution of $200 be worth at the end of 40 years?
5) Eric sets up a retirement account for his 13-year-old daughter and encourages her to deposit half of her babysitting earnings into the account. If she deposits $457 into the account now and if the account averages 8.25% interest compounded semi-annually, how much will be in the account 57 years from now when Rebecca turns 70?
6) Paula’s Aunt Jeanne put $10,000 in an education savings account on the day that Paula was born. Paula did not need to draw on the account for her undergraduate work because she had a National Merit Scholarship that covered all of her college expenses, but she is now getting ready to start graduate school and wonders how much is in the account. If the account has averaged 10.47% interest compounded quarterly for the last 28 years, how much is in the account now?
7) Mark has a credit card debt of $16,500 and is unable to pay the minimum monthly payment. The penalty rate for his credit card is 26.75% interest compounded monthly. Assuming no additional fees, how much will he owe four years later, when he finally is able to start paying down the debt?
8) Mark's parents offer to lend him the money to pay off his $16,500 credit card debt. If they offer him a loan at 2% interest compounded annually, how much will he owe them at the end of four years (assuming that he is unable to make any payments during that period of time)?
9) Jeff, aged 25, invests $12,000 in a retirement account now. If the account averages 14.5% interest compounded monthly, how much money will be in the account when he is ready to retire, 40 years from now?
10) When the first Apple iPod was released in 2001, it sold for $399. Margie thought about buying one, but in January of 2002 she instead invested the $399 in Apple stock. If the annual return on the investment averaged 29.2% compounded annually, how much was Margie's investment worth in January of 2020?