Mastering Simple Interest and Future Value Calculations

1. Avril's Bank Deposit

Avril deposited $800 in his bank at 1.5% for five years. Let's calculate the amount of interest Avril will earn using the simple interest formula:

Simple Interest Formula: Interest = Principal × Rate × Time

Interest = $800 × 1.5% × 5 = $60

Now, let's calculate the future value of Avril's deposit:

Future Value = Principal + Interest = $800 + $60 = $860

2. Phyllis' Loan

Phyllis borrowed $1,000 at 2% APR for six months. If she pays $200 two months into the loan and the rest at six months, let's calculate the total amount of interest Phyllis will pay using the simple interest formula:

Interest = Principal × Rate × Time

Interest = $1,000 × 2% × 6/12 = $10

Therefore, Phyllis will pay a total of $10 in interest.

3. James' Bank Deposit

James deposited $500 in his bank at 4.5% for 90 days. Let's calculate the amount of interest James will earn using exact interest:

Exact Interest = Principal × Rate × Time

Exact Interest = $500 × 4.5% × 90/365 = $5.48

Now, let's calculate the future value of James' deposit:

Future Value = Principal + Interest = $500 + $5.48 = $505.48

4. Ariel's Discount Note

Ariel signed a simple discount note for $3,500 at 3 1/2% for 60 days. Let's calculate the amount of interest Ariel will pay using ordinary interest:

Interest = Principal × Rate × Time

Interest = $3,500 × 3.5% × 60/360 = $19.38

Now, let's calculate the proceeds Ariel will receive on May 4:

Proceeds = Principal - Interest = $3,500 - $19.38 = $3,480.62

Amount to pay at maturity = Principal = $3,500

The note will be due on July 3.

5. APY for 16% APR

The effective rate (APY) for 16% APR compounded quarterly is:

APY = (1 + r/n)^n - 1

APY = (1 + 0.16/4)^4 - 1 = 16.36%

6. Louisa's Investment

Louisa invested $4,500 at 4% interest compounded semiannually for two years. Let's calculate the future value of Louisa's investment:

Future Value = Principal × (1 + Rate)^Time

Future Value = $4,500 × (1 + 0.04)^4 = $4,912.08

7. Cleve's Deposit

Cleve wants to have $8,000 in five years at a rate of 6% compounded quarterly. Let's calculate the amount he needs to deposit now:

Principal = Future Value / (1 + Rate)^Time

Principal = $8,000 / (1 + 0.06)^20 = $5,342.42

8. Payday Loan

If you want to borrow $900 for 20 days, the dollar amount of interest is:

Interest = Principal × Rate × Time

Interest = $900 × 12/100 × 20/365 = $5.92

Therefore, the APR of this loan is 292.54%.

9. Future Value of an Ordinary Annuity

The future value of an annuity with a quarterly payment of $1,000 for four years compounding quarterly at 8% is:

Future Value = Payment × [(1 + Rate/n)^nt - 1] / (Rate/n)

Future Value = $1,000 × [(1 + 0.08/4)^(4*4) - 1] / (0.08/4) = $20,439.90

10. Future Value of an Annuity Due

The future value of an annuity due with a monthly payment of $50 for 2.5 years compounding monthly at 6% is:

Future Value = Payment × [(1 + Rate/n)^nt - 1] / (Rate/n) × (1 + Rate/n)

Future Value = $50 × [(1 + 0.06/12)^(12*2.5) - 1] / (0.06/12) × (1 + 0.06/12) = $1,406.45

Questions:

1. What is the total amount of interest Phyllis will pay for her loan?

2. When will Ariel's discount note be due?

3. What is the APY for 16% APR compounded quarterly?

Answers:

1. Phyllis will pay a total of $10 in interest for her loan.

2. Ariel's discount note will be due on July 3.

3. The APY for 16% APR compounded quarterly is 16.36%.

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