For Dr. Rocal

Unit 1D p. 2 MA 151 Mathematical Methods for Business ^ Marymount University

If I want to have $10,000 for a cool vacation in four years, and I can invest in a CD that offers 5.25% interest compounded daily, how much do I need to set aside today?

HOMEWORK

1. Make an Excel file that calculates and then graphs with clear axis labels, titles, and legend the result when: a. $1 is invested for 10 years at 10% interest compounded annually b. $1 is invested for 10 years at 10% interest compounded monthly c. $1 is invested for 10 years at 10% interest compounded continuously

2. An accountant for a corporation forgot to pay the firm’s income tax of $321,812.85 on time. The government charged a

penalty based on an annual interest rate of 13.4% of the 29 days the money was late. What is the total amount that is now due? (Use a 365 day year.) from Lial

3. Upon graduation from college, Kelly was able to defer payment on his $40,000 subsidized Stafford student loan for 6 months. Since the interest will no longer be paid on his behalf, it will be added to the principal until payments begin. If the interest is 6.54% compounded monthly, what will the principal amount be when he must begin repaying his loan? From Lial.

4. You won the lottery! You can have $200,000 now or you can have $250,000 if you’re willing to wait 5 years. You can invest any money you earn today at 6% interest compounded continuously. Which deal should you take? Show why.

5. Joe needs to have $30,000 for a down-payment for a house in three years. He has $35,000 in the bank now. How much does he need to set aside at 4.25% interest compounded monthly today? (He’ll spend the rest on a toy.)

6. If I tell you your investment of $10,000 grows according to the formula = 10,000 . 5 what does that tell me, roughly and without use of a calculator, about the growth rate of my investment over the period of 1 year?

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