166 homework problems, 12B-copyright Joe Kahlig Chapter F, Page 1Chapter F Homework ProblemsCompiled by Joe KahligSection F.11. You invest $5000 at 6%/year simple interest. How muchis in the account at the end of 8 months?2. Matt paid $116.10 interest on a simple interest loan at9%/year simple interest for 1.5 years. How much did heborrow?3. You deposit $600 into a n account for 8 months. At theend of this time you have $638.(a) What is the annual simple interest rate for this ac-count?(b) What is the monthly simple interest rate for thisaccount?4. If you buy a 26 week T-bill (treasury bill) with a maturityvalue o f $10,0 00 for $9,562.56 from the U.S. Treasurydepartment. What annual simple interest rate will youearn?5. Find the effective rate of a discount loan with an a nnualdiscount rate of 7% and the loan must be paid back in(a) 3 months.(b) 8 months.6. David has agreed to pay back a $4,000 discount loan atthe end of 7 months. The loa n has an annual simplediscount rate of 6.72%.(a) What is the discount on this loan?(b) How much money does David actually receive fromthe loan?7. Bob needs $460 for his cellphone bill. He has taken outa discount loan so that he will have the money to pay offthis bill. The loan has an annual discount rate of 19%and has to be paid off in 3 months. What is the maturityvalue of this loan?8. Sarah took out a discount loan. She received $700 andwill payback $850 in 6 months. What was the annualdiscount rate of the loan?9. Carl is ge tting a discount loan that has a annual dis-count rate of 18%. He w ill have to payback the loan in8 months. If the disc ount of the loan is $325, how muchmoney does Carl get?Section F.210. Determine which is the better investment. 8.7%/yearcompounded semiannually or 8.6%/year compoundedmonthly. Justify your answer.11. What is the effective rate of 12% compounded quarterly?12. You put $1000 into an account that pays 5%/year com-pounded quarterly.(a) How much do you have in 6 years?(b) What is the effective yield of this account?13. You put $2 ,000 into an account and 5 years later had$8,450.50. If the account earned interest co mpoundedmonthly, what was the interest rate?14. How much interest is earned in six years if $3400 is de-posited into an account that pays interest at a rate of4%/year compounded semiannually?15. Fredd needs $7000 in 4 years. How much does he depositnow so that he will have this money if the account earns4.5%/year compounded quarterly?16. Alex wishes to have $3000 available to buy a car in fouryears. How much should he invest in a savings accountnow so that he will be able to do this? The bank pays10%/year interest c ompounded monthly.17. Six years ago, John bought some stock of a pizza com-pany. Unfortunately, this stock has decreased in value by5% every 4 months. If the current value of the stock is$375.78, how much did john invest in the company whenhe b ought the stock?18. You would like to purchase a 20-year zero-coupon U.S.treasury bond with a maturity value of $10,0 00 and anominal rate of 7%pe r year. How much should you payfor the bond?19. A small business borrows $50,000 for e xpansion and willrepay the lo an (interest plus principal) 5 years later.(a) If the lo an is charged interest at 12% compoundedmonthly, how much interest will the business pay?(b) A year later, with the expansion complete, the own-ers of the business dec ided to start saving to re-pay the loan. What monthly payments should theymake into an account earning interest at 5% com-pounded monthly so that they can repay the loan(interest and principal) when it is due?Section F.3 and F.420. Bob wants to deposit $300 at the e nd of every six monthsinto an IRA that pays 6.25%/year compounded semian-nually.(a) How much money is in the account at the end of 20years?(b) How much money did Bob deposit into the account?(c) How much interest did Bob get on the account?166 homework problems, 12B-copyright Joe Kahlig Chapter F, Page 221. You make a payment of $50 every month for 3 years.If the interes t rate of the account is 5% compoundedmonthly,(a) What is the balance after 3 years?(b) How much interest did you earn with this account?22. Sue starts an account with $500 and will make quarterlypayments so that the account w ill have $6000 at the endof 5 years. T he account has an interest rate of 7% peryear compounded quarterly.(a) What quarterly payment should be made?(b) what is the balance of the account after the 15thpayment?(c) How much interest did the account earn in the 15thperiod?(d) How much interest did the account earn in the thir dyear?23. You deposit $50 0 into an account and then make quar-terly payments of $150 for the next 5 ye ars. How muchwill be in the account at the end of the 5 years if youearn interest at a rate of 6% compounded quarterly?24. What is the value of the account at the end of 10 yearsif $1,000 is deposited every 6 months into an accountearning 8%/year compounded semiannually?25. You are go ing to make monthly payments into the ac-count of $100. The account earns intere st at a rate o f7%/year compounded monthly. You want the balance atthe end of 4 years to be $7000.(a) How much should you start this account with?(b) what is the balance of the account after the 20thpayment?(c) How much interest did the account earn in the 20thperiod?(d) How much interest did the account earn in the thir dyear?26. A company estimates it will have to replace a piece ofequipment at a cost of $100,000 in 5 years. To havethis money available in 5 yea rs, a fund is establishe d bydepositing $30,000 and making fixed monthly paymentsinto an account paying 7%/year compounded monthly.How much should each payment be?27. Bob won a law suit a few years ago and in the settlement,he is to recieve monthly payments o f $1500, for 22 years.Bob has decided to sell his payments to another companyfor a lump sum. What amount would he get if there arestill 16 years of payments left and the company is willingto buy the payments at an interest rate of(a) 6.4%/year compounded monthly.(b) 3.5%/year compounded monthly.(c) For part (a), How much more money would Bobhave recieved if he didn’t sell the payments?28. You have an annuity that pays you quarterly payments of$6000. You are in need of some cash and have decided tosell the annuity. The annuity currently has 78 paymentsremaining, i.e. you still have 7 8 payments to receive.How much money would you get if somebody is willingto buy this investment at the interest r ate of(a) 2.5%/year