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Compound Interest Practice
By Earl F Armstrong
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Last updated over 3 years ago
10 questions
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Here is the formula for compound interest:
A = Account balance after interest is earned
P = Principal (starting amount)
r = interest rate (as a decimal)
n = compounding factor (number of times per year the interest is calculated)
t = time in years
Question 1
1.
Your 2 year investment of $5,300 earns 2.9% and is compounded annually. What will your total return be?
Question 2
2.
You invested $100 at 8.2% which is compounded annually for 7 years. How much will your $100 be worth in 7 years?
Question 3
3.
Your investment of $18,100 at 13.6% compounded quarterly for 7½ years will be worth how much?
Joe deposits $14000 in an account earning 2% interest for 20 years.
Let's compare how the different forms of interest change the amount that Joe could earn.
Question 4
4.
What would his final balance be if Joe earned simple interest?
Question 5
5.
How much would Joe earn if the interest was compounded annually?
Question 6
6.
How much would Joe earn if the interest was compounded monthly?
Question 7
7.
How much would Joe earn if the interest was compounded daily?
Question 8
8.
How does the compounding factor affect the amount of interest that Joe earns?
Question 9
9.
If we kept increasing the compounding factor do you think that Joe's earnings would keep increasing or would we hit a limit?
Question 10
10.
BONUS:
How much would Joe earn if the interest was compounded every second?