Level 1
Chapter 12 – Section I – Exercise 11
Paragon Savings & Loan is paying 6% interest compounded monthly. How much
will $100 deposited at the end of each month be worth after 2 years?
Level 2
Chapter 12 – Section I – Exercise 12
Suntech Distributors, Inc., deposits $5,000 at the beginning of each 3-month period
for 6 years in an account paying 8% interest compounded quarterly.
a. How much will be in the account at the end of the 6-year period?
Number of years = 6
b. What is the total amount of interest earned in this account?
Level 1
Chapter 12 – Section I – Exercise 22
To establish a “rainy day” cash reserve account, Bonanza Industries deposits $10,000 of
its profit at the end of each quarter into a money market account that pays 1.75% interest
compounded quarterly.
a. How much will the account be worth in 3 years?
b. How much will the account be worth in 4 1/2 years?
Level 2
Chapter 12 – Section I – Exercise 23
As a part of his retirement planning strategy, Mark Woodson deposits $125 each payday
into an investment account at 3% interest compounded monthly. Mark gets paid on the
first day of each month.
a. How much will his account be worth in 5 years?
b. How much will his account be worth in 15 years?
Level 3
Chapter 12 – Section I – Exercise 24
Hi-Tech Hardware has been in business for a few years and is doing well. The
owner has decided to save for a future expansion to a second location. He invests
$1,000 at the end of every month at 12% interest compounded monthly.
a. How much will be available for the second store after 2 1/2 years?
Periodic rate: 1%
b. (Optional) Use the formula for an ordinary annuity to calculate how much would
be in the account if the owner saved for 5 years.
c. (Optional) Use the formula for an annuity due to calculate how much would be
in the account after 5 years if it had been an annuity due.
Level 1
Chapter 12 – Section II – Exercise 11
Diamond Savings & Loan is paying 6% interest compounded monthly. How
much must be deposited now to withdraw an annuity of $400 at the end of each
month for 2 years? Use Table 12-2.
Periodic rate: 0.5%
Level 1
Chapter 12 – Section II – Exercise 12
Jami Menard wants to receive an annuity of $2,000 at the beginning of each
year for the next 10 years. How much should be deposited now at 6% compounded
annually to accomplish this goal? Use Table 12-2.
Periodic rate: 6.0%
Level 2
Chapter 12 – Section II – Exercise 13
As the chief accountant for the Proline Industries, you have estimated that the
company must pay $100,000 income tax to the IRS at the end of each quarter this
year. How much should be deposited now at 8% interest compounded quarterly
to meet this tax obligation? Use Table 12-2.
Number of years = 1
Level 3
Chapter 12 – Section II – Exercise 14
Ron Sample is the grand prize winner in a college tuition essay contest sponsored
by a local scholarship fund. The winner receives $2,000 at the beginning of each year
for the next 4 years. How much should be invested at 7% interest compounded
annually to pay the prize? Use Table 12-2.
Number of years = 4
Level 2
Chapter 12 – Section II – Exercise 23
As part of an inheritance, Joan Townsend will receive an annuity of $1,500 at the end of
each month for the next 6 years. What is the present value of this inheritance at a rate of
2.4% interest compounded monthly?
Number of years = 6
Level 2
Chapter 12 – Section II – Exercise 24
Norm Legend has been awarded a scholarship from Canmore College. For the next 4
years, he will receive $3,500 for tuition and books at the beginning of each quarter. How
much must the school set aside now in an account earning 3% interest compounded
quarterly to pay Norm’s scholarship?
Number of years = 4