3) Maria deposited $1000 in an independent retirement account at her bank. She earns 0.5% interest per
month on the balance. Each month, she deposits $100 in the account. Her balance each month after making
a $100 deposit, is given by the recursively defined sequence
B0 = $1000 Bn = 1.005Bn–1 + 100
If she made the initial deposit on September 30, and makes each monthly deposit on the last day of the
month, how much money will be in the account at the end of the year for Maria to count as a deduction
for that year’s federal income taxes? That is, determine B3.
A) $1316.58 B) $1105.00 C) $1210.53 D) $1472.88
4)
ack decided to put $500 into an IRA account every 3 months at a rate of 6% compounded quarterly. Find
a recursive formula that represents his balance at the end of each quarter. How many years will it be
before the value of the account is $100,000? What will be the balance in 30 years when Jack retires?
A) B0 = 500, Bn = 1
+ 0.06
4B(n – 1) + 500; 24 years; $168,129
B) B0 = 500, Bn = 1
+ 0.06
3B(n – 1) + 500; 27 years; $126,050
C) B0 = 500, Bn = 1
+ 0.6
4B(n – 1) + 500; 24 years; $168,129
D) B0 = 500, Bn = 1
+ 0.6
3B(n – 1) + 500; 27 years; $126,050
5) After working for 25 years you would like to have $500,000 in an annuity for early retirement. If the
annual interest rate is 7.5%, compounded monthly, what will your monthly deposit need to be?
A) $569.96 B) $1733.36 C) $689.42 D) $1139.92
6) To save for retirement, you decide to deposit $1250 into an IRA at the end of each year for the next 40
years. If the interest rate is 6% per year compounded annually, find the value of the IRA after 40 years.
Round to the nearest dollar.
A) $193,452 B) $11,607 C) $181,323 D) $1,941,040
7) Looking ahead to retirement, you sign up for automatic savings in a fixed–income 401K plan that pays 7%
per year compounded annually. You plan to invest $3000 at the end of each year for the next 10 years.
How much will your account have in it at the end of 10 years? Round to the nearest dollar.
A) $41,449 B) $43,219 C) $39,906 D) $42,747
8) Lonnie deposits $150 each month into an account paying annual interest of 6.5% compounded monthly.
How much will his account have in it at the end of 15 years? Round to the nearest dollar.
A) $45,532 B) $3627 C) $45,378 D) $45,661
9) Laura invests $250 each quarter in a fixed–interest mutual fund paying annual interest of 7% compounded
quarterly. How much will her account have in it at the end of 6 years? Round to the nearest dollar.
A) $7378 B) $1788 C) $22,136 D) $7507
10) You deposit $100 every 6 months into an annuity with an annual interest rate of 8%
compounded
semiannually. What is the balance after 20 years? What is the balance after 40 years?
A) $9502.55; $55,124.50 B) $2977.81; $55,124.50
C) $2977.81; $9502.55 D) $9502.55; $25,905.65
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