MATH 110 Sec 8-2: Interest Practice Exercises

Find the simple interest if theprincipal is $500, the interest rate is 11%

and the time is 2 years.

MATH 110 Sec 8-2: InterestPractice Exercises

Find the simple interest if theprincipal is $500, the interest rate is 11%

and the time is 2 years.

MATH 110 Sec 8-2: InterestPractice Exercises

𝐼=𝑃𝑟𝑡

If the simple interest on $3000 for9 years is $1620, then what is the rate?

MATH 110 Sec 8-2: InterestPractice Exercises

If the simple interest on $3000 for9 years is $1620, then what is the rate?

MATH 110 Sec 8-2: InterestPractice Exercises

𝐼=𝑃𝑟𝑡

Use the future value formula for simple interest to find P if A=$2448, r=6%, t=6.

MATH 110 Sec 8-2: InterestPractice Exercises

Use the future value formula for simple interest to find P if A=$2448, r=6%, t=6.

MATH 110 Sec 8-2: InterestPractice Exercises

)

What is the value of an account at the end of 6 yearsif a principal of $13,000 is deposited in an account atan annual interest rate of 4% compounded monthly?

(Round final answer to the nearest cent.)

MATH 110 Sec 8-2: InterestPractice Exercises

What is the value of an account at the end of 6 yearsif a principal of $13,000 is deposited in an account atan annual interest rate of 4% compounded monthly?

(Round final answer to the nearest cent.)

MATH 110 Sec 8-2: InterestPractice Exercises

where

What is the value of an account at the end of 6 yearsif a principal of $13,000 is deposited in an account atan annual interest rate of 4% compounded monthly?

(Round final answer to the nearest cent.)

MATH 110 Sec 8-2: InterestPractice Exercises

where Also remember that:A = accumulated (future) valueP = principal (present value)t = time (in years)r = annual interest rate (decimal)

A student has a government-backed loan for which payments are not due and interest does not

accumulate until the student stops attending college.If the student borrowed $10,000 at an annual interest

rate of 7.5%, how much interest is due 4 monthsafter the student must begin payments?

MATH 110 Sec 8-2: InterestPractice Exercises

A family is planning a vacation in 2 years. They wantto get a certificate of deposit for $1500 to be cashed in

for the trip. What is the minimum annual simple interest rate needed to have $2100 for the vacation?

MATH 110 Sec 8-2: InterestPractice Exercises

A family is planning a vacation in 2 years. They wantto get a certificate of deposit for $1500 to be cashed in

for the trip. What is the minimum annual simple interest rate needed to have $2100 for the vacation?

MATH 110 Sec 8-2: InterestPractice Exercises

𝐼=𝑃𝑟𝑡Solution I:

A family is planning a vacation in 2 years. They wantto get a certificate of deposit for $1500 to be cashed in

for the trip. What is the minimum annual simple interest rate needed to have $2100 for the vacation?

MATH 110 Sec 8-2: InterestPractice Exercises

𝐼=𝑃𝑟𝑡Solution I:

Answer:

Solution II:

𝐴=𝑃 (1+𝑟𝑡)

The Consumer Price Index (CPI) is an inflation measure and is equal to the percent of change in

the CPI between 2 years.

MATH 110 Sec 8-2: InterestPractice Exercises

The Consumer Price Index (CPI) is an inflation measure and is equal to the percent of change in

the CPI between 2 years.

MATH 110 Sec 8-2: InterestPractice Exercises

a. What was the inflation rate from 1950 to 1990? (Round inflation rate percent to one decimal place.)

The Consumer Price Index (CPI) is an inflation measure and is equal to the percent of change in

the CPI between 2 years.

MATH 110 Sec 8-2: InterestPractice Exercises

a. What was the inflation rate from 1950 to 1990? (Round inflation rate percent to one decimal place.)

Note: The inflation rate (using CPI) is a percent change:

MATH 110 Sec 8-2: InterestPractice Exercises

b. If a pair of sneakers cost $38 in 1950, use the CPI to estimate the cost in 1990. (Use the unrounded value from part a but round the final answer to the nearest cent.)

The Consumer Price Index (CPI) is an inflation measure and is equal to the percent of change in

the CPI between 2 years.

MATH 110 Sec 8-2: InterestPractice Exercises

b. If a pair of sneakers cost $38 in 1950, use the CPI to estimate the cost in 1990. (Use the unrounded value from part a but round the final answer to the nearest cent.)

Note 1: The unrounded value from part a was: .

The Consumer Price Index (CPI) is an inflation measure and is equal to the percent of change in

the CPI between 2 years.

MATH 110 Sec 8-2: InterestPractice Exercises

b. If a pair of sneakers cost $38 in 1950, use the CPI to estimate the cost in 1990. (Use the unrounded value from part a but round the final answer to the nearest cent.)

Note 1: The unrounded value from part a was: .

The Consumer Price Index (CPI) is an inflation measure and is equal to the percent of change in

the CPI between 2 years.

Note 2: The percent change in price from 1950 to 1990 is just the inflation rate from part a.

MATH 110 Sec 8-2: InterestPractice Exercises

b. If a pair of sneakers cost $38 in 1950, use the CPI to estimate the cost in 1990. (Use the unrounded value from part a but round the final answer to the nearest cent.)

Note 1: The unrounded value from part a was: .

The Consumer Price Index (CPI) is an inflation measure and is equal to the percent of change in

the CPI between 2 years.

Note 2: The percent change in price from 1950 to 1990 is just the inflation rate from part a.𝐸𝑠𝑡 .𝑐𝑜𝑠𝑡 𝑖𝑛1990−𝐶𝑜𝑠𝑡 𝑖𝑛1950

𝐶𝑜𝑠𝑡 𝑖𝑛1950=𝐼𝑛𝑓𝑙𝑎𝑡𝑖𝑜𝑛𝑟𝑎𝑡𝑒 𝑓𝑟𝑜𝑚𝑝𝑎𝑟𝑡 𝑎

Compute the monthly payment for a simple interest loan of $2660, with an annual interest rate of 8% anda term of 5 years. (Round answer to the nearest cent.)

MATH 110 Sec 8-2: InterestPractice Exercises

Compute the monthly payment for a simple interest loan of $2660, with an annual interest rate of 8% anda term of 5 years. (Round answer to the nearest cent.)

MATH 110 Sec 8-2: InterestPractice Exercises

Strategy:Step 1: Find the future value A of the loan.

Compute the monthly payment for a simple interest loan of $2660, with an annual interest rate of 8% anda term of 5 years. (Round answer to the nearest cent.)

MATH 110 Sec 8-2: InterestPractice Exercises

Strategy:Step 1: Find the future value A of the loan.Step 2: Divide A by the total number of payments for the life of the loan

Compute the monthly payment for a simple interest loan of $2660, with an annual interest rate of 8% anda term of 5 years. (Round answer to the nearest cent.)

MATH 110 Sec 8-2: InterestPractice Exercises

Strategy:Step 1: Find the future value A of the loan.

Compute the monthly payment for a simple interest loan of $2660, with an annual interest rate of 8% anda term of 5 years. (Round answer to the nearest cent.)

MATH 110 Sec 8-2: InterestPractice Exercises

Strategy:Step 1: Find the future value A of the loan. A = $3724Step 2: Divide A by the total number of payments for the life of the loan

Compute the monthly payment for a simple interest loan of $2660, with an annual interest rate of 8% anda term of 5 years. (Round answer to the nearest cent.)

MATH 110 Sec 8-2: InterestPractice Exercises

Strategy:Step 1: Find the future value A of the loan. A = $3724Step 2: Divide A by the total number of payments for the life of the loan where # of payments = (12 / year)(5 years) = 60

A student graduates from college with $43,000 in student loans and a 6.5% annual simple interest rate.

To reduce his debt as quickly as possible, beginning next month he is going to pay $700 per month toward the loan. After his first payment, how much will he still

owe on the loan? (Round answer to nearest cent.)

MATH 110 Sec 8-2: InterestPractice Exercises

A student graduates from college with $43,000 in student loans and a 6.5% annual simple interest rate.

To reduce his debt as quickly as possible, beginning next month he is going to pay $700 per month toward the loan. After his first payment, how much will he still

owe on the loan? (Round answer to nearest cent.)

MATH 110 Sec 8-2: InterestPractice Exercises

StrategyStep 1: Find amt of interest owed for 1st month.

A student graduates from college with $43,000 in student loans and a 6.5% annual simple interest rate.

To reduce his debt as quickly as possible, beginning next month he is going to pay $700 per month toward the loan. After his first payment, how much will he still

owe on the loan? (Round answer to nearest cent.)

MATH 110 Sec 8-2: InterestPractice Exercises

StrategyStep 1: Find amt of interest owed for 1st month.Step 2: Find total owed (Principal + Interest).

A student graduates from college with $43,000 in student loans and a 6.5% annual simple interest rate.

To reduce his debt as quickly as possible, beginning next month he is going to pay $700 per month toward the loan. After his first payment, how much will he still

owe on the loan? (Round answer to nearest cent.)

MATH 110 Sec 8-2: InterestPractice Exercises

StrategyStep 1: Find amt of interest owed for 1st month.Step 2: Find total owed (Principal + Interest).Step 3: Subtract off the 1st month’s actual payment.

A student graduates from college with $43,000 in student loans and a 6.5% annual simple interest rate.

To reduce his debt as quickly as possible, beginning next month he is going to pay $700 per month toward the loan. After his first payment, how much will he still

owe on the loan? (Round answer to nearest cent.)

MATH 110 Sec 8-2: InterestPractice Exercises

StrategyStep 1: Find amt of interest owed for 1st month.

A student graduates from college with $43,000 in student loans and a 6.5% annual simple interest rate.

To reduce his debt as quickly as possible, beginning next month he is going to pay $700 per month toward the loan. After his first payment, how much will he still

owe on the loan? (Round answer to nearest cent.)

MATH 110 Sec 8-2: InterestPractice Exercises

StrategyStep 1: Find amt of interest owed for 1st month. 𝐼=𝑃𝑟𝑡

A student graduates from college with $43,000 in student loans and a 6.5% annual simple interest rate.

To reduce his debt as quickly as possible, beginning next month he is going to pay $700 per month toward the loan. After his first payment, how much will he still

owe on the loan? (Round answer to nearest cent.)

MATH 110 Sec 8-2: InterestPractice Exercises

StrategyStep 1: Find amt of interest owed for 1st month. 𝐼=𝑃𝑟𝑡 Note: Time (t) must be in years and year.

A student graduates from college with $43,000 in student loans and a 6.5% annual simple interest rate.

To reduce his debt as quickly as possible, beginning next month he is going to pay $700 per month toward the loan. After his first payment, how much will he still

owe on the loan? (Round answer to nearest cent.)

MATH 110 Sec 8-2: InterestPractice Exercises

StrategyStep 1: Find amt of interest owed for 1st month. $232.92

A student graduates from college with $43,000 in student loans and a 6.5% annual simple interest rate.

To reduce his debt as quickly as possible, beginning next month he is going to pay $700 per month toward the loan. After his first payment, how much will he still

owe on the loan? (Round answer to nearest cent.)

MATH 110 Sec 8-2: InterestPractice Exercises

StrategyStep 1: Find amt of interest owed for 1st month. $232.92Step 2: Find total owed (Principal + Interest).TOTAL OWED = PRINCIPAL + INTEREST

A student graduates from college with $43,000 in student loans and a 6.5% annual simple interest rate.

To reduce his debt as quickly as possible, beginning next month he is going to pay $700 per month toward the loan. After his first payment, how much will he still

owe on the loan? (Round answer to nearest cent.)

MATH 110 Sec 8-2: InterestPractice Exercises

StrategyStep 1: Find amt of interest owed for 1st month. $232.92Step 2: Find total owed (Principal + Interest). $43232.92

A student graduates from college with $43,000 in student loans and a 6.5% annual simple interest rate.

To reduce his debt as quickly as possible, beginning next month he is going to pay $700 per month toward the loan. After his first payment, how much will he still

owe on the loan? (Round answer to nearest cent.)

MATH 110 Sec 8-2: InterestPractice Exercises

StrategyStep 1: Find amt of interest owed for 1st month. $232.92Step 2: Find total owed (Principal + Interest). $43232.92Step 3: Subtract off the 1st month’s actual payment ($700).$43232.92 - $700.00 = $42532.92