Mathematics for Business GS 1129

Week 3 and 4 Tutorial

Simple Interest and Compound Interest
1. Ali invested $4000 for 5 years at a rate of 3% compound interest.
How much will he have in total at the end of this time?

2. Ahmad and Siti inherited $2000 each. Ahmad invests his money for 2
years at a rate of 6% compound interest. Siti invests his money at a
rate of 6 % per annum simple interest for 2 years. Who will have the
most money at the end of their investment?

3. Find the future values for the following investments.

(a) $20,000 at 5% compounded annually for 5 years
(b) $30,000 at 6 % compounded semi-annually for 5 years 6 months
(c) $11,500 at 8% compounded quarterly for years
(d) $120,000 at 5% compounded monthly for years
(e) $120,000 at 9% compounded daily for 270 days

4. Suppose $1,000 is invested at an annual interest rate of 5%. Compute

the amount accumulated after 20 years if the interest is
(a) simple interest,
(b) compounded monthly.

Calculate the difference between the accumulated values in the two

cases above.

5. $25,000 is invested for 4 years 9 months. If the investment is offered

12% compounded semi-annually for the first 2 years and 10%
compounded quarterly for the rest of the period, find the future value
of this investment.

6. $65,000 is invested for 6 years 9 months. If the investment is offered

5% compounded semi-annually for the first 2 years, 6% compounded
monthly for the next 18 months and 7% compounded daily for the rest
of the period, find the future value of this investment.
Politeknik Brunei , General Studies Department, Mathematics
7. At the end of every year for three years, $1,000 is invested in an
account that offers 8% compounded annually. Find the account
amount at the end of the three years.

8. June Peters deposits $6,400 in a savings account at her bank. When

she withdraws the money 8 months later, she receives a check for
$ 6,506.67. Assume simple interest and find the rate of interest paid
by the bank.

9. Find the interest earned on $ 10, 000 for 4 years at 6 % compounded

(a) yearly, ( b ) semiannually, ( c ) quarterly, and ( d ) monthly.
(e) daily ( f ) Find the simple interest.

Answer:
1. $4637.10
2. Ahmad’s investment = $2,247.20
Siti’s investment = $2,240
Ahmad will have the most money at the end of 10 years.
3. (a) $25,525.63 (b) $41,527.02 (c) $14,298.80
(d) $141,126.15 (e) $128,259.93
4. (a) $2,000 (b) $2,712.64; $712.64
5. $41,411.98
6. $98,534.98
7. $3246.40
8. R = 2.5%
9. (a) $ 2 624.77 ; (b) $ 2 667.7 ; (c) $ 2 689.86 ; (d) $ 2 704.89 ; (e) $ 2,712.24
(f) $ 2 400

Politeknik Brunei , General Studies Department, Mathematics