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Lydia's aunt Rose left her $5,000. Lydia spent $1,000 on her wardrobe and deposited the rest in an account that pays 6.9% compounded daily. How much money will she have in 5 years?

$5647.77

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Thuy needs $1,850 in eight months for her college tuition. How much money should she deposit lump sum in an account paying 8.2% compounded monthly to achieve that goal?

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Bank A pays 5% compounded daily, while Bank B pays 5.12% compounded monthly. Which bank pays more? Explain.

Bank B

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EZ Photo Company needs five copying machines in 2 1/2 years for a total cost of $15,000. How much money should be deposited now to pay for these machines, if the interest rate is 8% compounded semiannually?

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Jon's grandfather was planning to give him $12,000 in 10 years. Jon has convinced his grandfather to pay him $6,000 now, instead. If Jon invests this $6,000 at 7.5% compounded continuously, how much money will he have in 10 years?

$12702.00

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What will be the price of a $20,000 car in 5 years if the inflation rate is 6%?

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At an interest rate of 8% compounded continuously, how many years will it take to double your money? Hint: You may do this on your calculator by trial and error.

8.66 years

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If an investment earns 10% compounded continuously, in how many years will it triple? Hint: You may do this on your calculator by trial and error.

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The City Library has ordered a new computer system costing $158,000. The system will be delivered in 6 months, and the full amount will be due 30 days after delivery. How much should be deposited today into an account paying 7.5% compounded monthly to have $158,000 in 7 months?

$151257.12

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Mr. and Mrs. Tran are expecting a baby girl in a few days. They want to put away money for her college education now. How much money should they deposit in an account paying 10.2% so they will have $100,000 in 18 years to pay for their daughter's educational expenses?

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Find the effective interest rate for an account paying 7.2% compounded quarterly.

7.3967%

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If a bank pays 5.75% compounded monthly, what is the effective interest rate?

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Population of California in the year 1995 was 32 million. If the population grows at a rate of 2%, what will the population be in 2025?

57.96 million

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According to the Law of 70, if an amount grows at an annual rate of 1%, then it doubles every seventy years. Suppose a bank pays 5% interest, how long will it take for you to double your money? How about at 15%?

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Annuities and sinking funds

Each of the following problems involve an annuity - a sequence of payments.

Find the future value of an annuity of $200 per month for 5 years at 6% compounded monthly.

$13,954.01

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How much money should be deposited at the end of each month in an account paying 7.5% for it to amount to $10,000 in 5 years?

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At the end of each month Rita deposits $300 in an account that pays 5%. What will the final amount be in 4 years?

$15,904.47

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Mr. Chang wants to retire in 10 years and can save $650 every three months. If the interest rate is 7.8%, how much will he have at the end of 5 years?

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A firm needs to replace most of its machinery in five years at a cost of $500,000. The company wishes to create a sinking fund to have this money available in five years. How much should the quarterly deposits be if the fund earns 8%?

$20,578.36

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Source:  OpenStax, Applied finite mathematics. OpenStax CNX. Jul 16, 2011 Download for free at http://cnx.org/content/col10613/1.5
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