Level 1
Chapter 11 – Section I – Exercise 15
Use Table 11-1 to calculate the compound amount and compound interest for an invest-
ment of $67,000 for 2 years at 18% nominal rate compounded monthly.
Level 1
Chapter 11 – Section I – Exercise 29
Sherry Smith invested $3,000 at the Horizon Bank, at 6% interest compounded
quarterly.
a. What is the annual percentage yield of this investment?
b. What will Sherry‘s investment be worth after 6 years?
Level 2
Chapter 11 – Section I – Exercise 31
You are owner of a UPS Store franchise. You have just deposited $12,000 in an invest-
ment account earning 12% compounded monthly. This account is intended to pay for
store improvements in 2 1/2 years. At that rate, how much will be available in the account
for the project?
Level 3
Chapter 11 – Section I – Exercise 32
The First National Bank is offering a 6-year certificate of deposit (CD) at 4% interest,
compounded quarterly; Second National Bank is offering a 6-year CD at 5% interest,
compounded annually.
a. If you were interested in investing $8,000 in one of these CDs, calculate the compound
amount of each offer.
b. What is the annual percentage yield of each CD?
c. (Optional) If Third National Bank has a 6-year CD at 4.5% interest compounded
monthly, use the compound interest formula to find the compound amount of this offer.
Level 1
Chapter 11 – Section I – Exercise 39
Gabriel Hopen, a 32-year-old commercial artist, has just signed a contract with an adver-
tising agency. Gabriel’s starting salary is $47,800. The agency has agreed to increase
his salary by 8.5% annually. Use the future value formula to calculate how much Gabriel’s
salary will be after 5 years? Round to the nearest whole dollar.
Level 2
Chapter 11 – Section I – Exercise 40
The FernRod Motorcycle Company invested $250,000 at 4.5% compounded monthly to
be used for the expansion of their manufacturing facilities. Use the future value formula
to calculate how much will be available for the project in 3 1/2 years.
Level 1
Chapter 11 – Section II – Exercise 5
Use Table 11-2 to calculate the present value and the compound interest if the com-
pound amount is $50,000 accumulated over 25 years at 11% compounded annually.
Level 2
Chapter 11 – Section II – Exercise 7
Use Table 11-2 to calculate the present value and the compound interest if the com-
pound amount is $9,800 accumulated over 4 years at 12% compounded quarterly.
Level 2
Chapter 11 – Section II – Exercise 15
Use Table 11-2 to create a new table factor, then calculate the present value of $110,000
which is the result of a 17-year investment at 8% compounded semiannually.
(NOTE: use Excel’s ROUND function to limit the internal accuracy to 5 significant figures.)
Level 3
Chapter 11 – Section II – Exercise 17
Samantha Wimberly is planning a vacation in Europe in 4 years, after graduation. She
estimates that she will need $3,500 for the trip.
a. If her bank is offering 4-year certificates of deposit with 8% interest compounded
quarterly, how much must Samantha invest now to have the money for the trip?
b. How much compound interest will be earned on the investment?
Level 2
Chapter 11 – Section II – Exercise 27
Alana and Eva Rodriguez are planning a cross-country road trip in 3 years. They estimate
$6,000 will be needed to cover expenses. The National Bank of Pinecrest is offering a
3-year CD paying 3.62% interest compounded quarterly.
a. Use the present value formula to figure out how much they should set aside now
to achieve their goal? Round to the nearest whole dollar.
b. How much interest will Alana and Eva earn on the CD?
Level 3
Chapter 11 – Section II – Exercise 28
Mike Gioulis would like to have $25,000 in 4 years to pay off a balloon payment on his
business mortgage. His money market account is paying 1.825% compounded daily.
Disregarding leap years, how much money must Mike put in his account now to achieve
his goal? Round to the nearest whole dollar.
Level 1
Chapter 11 – Assessment Test – Exercise 15
What is the compound amount and compound interest of $36,000 invested at 12% com–
pounded semiannually for 7 years? NOTE: Excel will provide greater accuracy with the
compound interest formula than may be obtained by using Table 11-2. Therefore, answers
will differ slightly from those in the book.
Level 2
Chapter 11 – Assessment Test – Exercise 16
What is the present value of $73,000 in 11 years if the interest rate is 8% compounded
semiannually? NOTE: the value obtained by using the present value formula will be more
accurate than that obtained using a factor from Table 11-2.
Level 2
Chapter 11 – Assessment Test – Exercise 24
Applegate Industries is planning to expand its production facility in a few years. New plant
construction costs are estimated to be $4.50 per square foot. The company invests
$850,000 today at 8% interest compounded quarterly.
a. How many square feet of new facility could be built after 3 1/2 years?
Number of years = 3 1/2
Periods per year = 4
b. If the company waits 5 years, but construction costs increase to $5.25 per
square foot, how many square feet could be built? What do you recommend?
Number of years = 5
Level 3
Chapter 11 – Assessment Test – Exercise 25
Over the past 10 years you made the following investments:
1. Deposited $10,000 at 8% compounded semiannually, in a 3-year certificate
of deposit.
a. What was the total worth of your investment when the last certificate matured?
b. What is the total amount of compound interest earned over the 10-year period?
Level 2
Chapter 11 – Assessment Test – Exercise 36
What is the compound amount and compound interest of a $73,000 investment earning
2.9% interest compounded semiannually for 4 years? Round to the nearest whole dollar.
Level 3
Chapter 11 – Assessment Test – Exercise 39
Greg and Verena Sava need $20,000 in 3 years to expand their goat cheese business. The
Bank of Sutton is offering a 3-year CD paying 3.9% compounded monthly. How much
should they invest now to achieve their goal? Round to the nearest whole dollar.