Q: A $$12,000 loan at 4% compounded semi-annually for 3 years results in a total owed of 13$$,518.71. What is the effective annual rate (EAR)?

$$\text{EAR} = (1 + \frac{0.04}{2})^2$ - 1 = 0.0404$$

Question 1

A bank offers a savings account with a fixed annual interest rate of 5% compounded annually. If you deposit $10,000, what will the account balance be after 3 years?

Accepted Answer

$$\11$$,576.25$

Question 2

Which formula is used to calculate compound interest when interest is compounded annually?

Accepted Answer

$$A = P(1 + \frac{r}{n}$$)^{nt}$$

Question 3

You invest $5,000 at an annual interest rate of 6% compounded monthly for 2 years. What is the account balance at the end of 2 years?

Accepted Answer

$$\5$$,636.57$

Question 4

If you borrow $12,000 at 4% compounded semi-annually for 3 years, how much will you owe at the end of 3 years?

Accepted Answer

$$\13$$,518.71$

Question 5

A loan of $8,000 is taken at 7.1% compounded monthly for 2 years. What is the total amount owed after 2 years?

Accepted Answer

$$\9$$,236.96$

Question 6

Which of the following best describes the effect of compounding frequency on the total interest earned?

Accepted Answer

The more frequently interest is compounded, the greater the total interest earned.

Question 7

You invest $40,000 at 4.1% compounded semi-annually for 3 years. What is the account balance after 3 years?

Accepted Answer

$$\45$$,236.00$

Question 8

A $20,000 investment receives 5.2% interest compounded semi-annually for 3 years. What is the total return?

Accepted Answer

$$\23$$,320.67$

Question 9

If you borrow $50,000 for 2 years at 11% compounded monthly, what is the total amount you will pay back?

Accepted Answer

$$\62$$,328.96$

Question 10

Which scenario would result in the highest account balance after 5 years, assuming the same principal and annual interest rate?

Accepted Answer

Interest compounded daily

Question 11

A $$12,000 loan at 4% compounded semi-annually for 3 years results in a total owed of 13$$,518.71. What is the effective annual rate (EAR)?

Accepted Answer

$$	ext{EAR} = (1 + \frac{0.04}{2})^2$ - 1 = 0.0404$$

Question 12

If you invest $1,000 at 5% compounded annually for 5 years, what is the account balance?

Accepted Answer

$$\1$$,276.28$

Question 13

A $2,500 investment at 6% compounded annually for 10 years will result in which account balance?

Accepted Answer

$$\4$$,477.46$

Question 14

Which of the following is NOT a factor in the compound interest formula?

Accepted Answer

The number of withdrawals made

Question 15

You invest $6,314 at 6% compounded annually for 8 years. What is the account balance?

Accepted Answer

$$\10$$,073.60$

Question 16

A $2,518 investment at 6% compounded annually for 10 years will result in which account balance?

Accepted Answer

$$\4$$,505.60$

Question 17

If you invest $5,000 at 6% compounded annually for 10 years, what is the account balance?

Accepted Answer

$$\8$$,936.00$

Question 18

A $10,000 investment at 5% compounded annually for 10 years will result in which account balance?

Accepted Answer

$$\16$$,288.95$

Question 19

If you borrow $12,500 at 4% compounded semi-annually for 3 years, how much will you owe at the end of 3 years?

Accepted Answer

$$\14$$,098.39$

Question 20

You invest $1,200 at 4% compounded semi-annually for 3 years. What is the account balance?

Accepted Answer

$$\1$$,349.71$

Step-by-Step Guidance for Compound Interest Problems in College Algebra

Study Guide - Practice Questions

Study Guide - Flashcards