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Exam 2: Banking Services

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Question 21

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Compound interest earns more than simple interest at the same interest rate because compounding pays interest on the interest earned.

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Question 22

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Steve inherited $100,000 from his grandmother and deposited it into an account that compounds interest monthly at a rate of 4.9%.Each month,he withdraws $500 from the account.How long will it take him until the account has a balance of $0? Round your answer to the nearest tenth of a year.

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Steve's account will...

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Question 23

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Carmencita is 12 years old and she is saving for a car.She wants to have $5,000 by the time she is 16 years old.She opens a savings account with an APR of 3.9% compounded weekly.How much should she deposit into her account each week to meet her goal?

Aaron wants to know how much he needs to save each month in his savings account to have a certain amount in the future.He should use the formula for present value of a periodic deposit investment.

Tamika opened a money market account that has a 4.25% annual interest rate,compounded annually.She deposits $1,750 into the account each year.How much interest will the account earn after 15 years?

Alesha wants to deposit $25,000 into an account that compounds interest.She hopes to have $40,000 in 7 years for a down payment on a house.What interest rate must she find in order to accomplish her goal? Round your answer to the nearest hundredth of a percent.

James and Terry open a savings account that has a 2.75% annual interest rate,compounded monthly.They deposit $500 into the account each month.How much will be in the account after 20 years?

Tammy sold a diamond ring for $10,000.She placed half of the money into a CD with a 3.9% interest rate compounded daily.She placed the other half into a CD with the same interest rate but compounded monthly.What is the difference in the interest earned on each amount after 4 years?

Landry deposits $10,000 into an account that compounds interest continuously at a rate of 2.375%.How long will it take his money to grow to $11,000? Round your answer to the nearest tenth of a year.

Huong deposits $2,000 into an account that earns 4.2% interest compounded daily.What is the annual percentage yield (APY)to the nearest hundredth of a percent?

Conrad Savings Bank has a $50 overdraft fee.On Friday,Mr.McQuire deposited his paycheck of $468.92 for a total account balance of $712.34.The next morning,his wife wrote a check for $1,267.45 for a new refrigerator and stove.The check cleared the bank by the end of the day.What is the current balance in the McQuires' account?

What does the variable n represent in the formula below? ​

Margarite wants to take a trip to Japan in 8 years.She knows she will need about $4,200.How much should she deposit into an account now that pays 3.5% interest,compounded daily,to meet her goal? Round to the nearest dollar.

Rajesh invested $30,000 into an account that has a monthly rate of return of 0.79%.He has made arrangements to withdraw $250 automatically every month to pay off his 10-year student loan.Will Rajesh have enough money in the account to cover all of the required loan payments? If so,how long can he continue to withdraw $250 each month to put toward a car payment? (Round to the nearest year. )

Interest compounded semiannually is compounded four times a year.

Tyrone opens an account at the local bank by depositing $50 of his birthday money.He continues to deposit $50 each month for 5 years.If the account pays % interest compounded monthly,how much is in the account after 5 years?

Sonja and Jake just got married.They received $4,500 in gift money and deposited it into a savings account that pays 2.85% simple interest.How much will they have in savings after 3 years?

Loretta deposits $350 every quarter into a savings account that earns 4.5% interest compounded quarterly.What is the balance after 7 years?