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MATH 110 Sec 8-2: Interest Practice Exercises Find the simple interest if the principal is $500, the interest rate is 11% and the time is 2 years. MATH 110 Sec 8-2: Interest Practice Exercises Find the simple interest if the principal is $500, the interest rate is 11% and the time is 2 years. = MATH 110 Sec 8-2: Interest Practice Exercises If the simple interest on $3000 for 9 years is $1620, then what is the rate? MATH 110 Sec 8-2: Interest Practice Exercises If the simple interest on $3000 for 9 years is $1620, then what is the rate? = MATH 110 Sec 8-2: Interest Practice Exercises Use the future value formula for simple interest to find P if A=$2448, r=6%, t=6. MATH 110 Sec 8-2: Interest Practice Exercises Use the future value formula for simple interest to find P if A=$2448, r=6%, t=6. = (1 + ) MATH 110 Sec 8-2: Interest Practice Exercises What is the value of an account at the end of 6 years if a principal of $13,000 is deposited in an account at an annual interest rate of 4% compounded monthly? (Round final answer to the nearest cent.) MATH 110 Sec 8-2: Interest Practice Exercises What is the value of an account at the end of 6 years if a principal of $13,000 is deposited in an account at an annual interest rate of 4% compounded monthly? (Round final answer to the nearest cent.) = (1 + ) where = , = MATH 110 Sec 8-2: Interest Practice Exercises What is the value of an account at the end of 6 years if a principal of $13,000 is deposited in an account at an annual interest rate of 4% compounded monthly? (Round final answer to the nearest cent.) = (1 + ) where = , = Also remember that: A = accumulated (future) value P = principal (present value) t = time (in years) r = annual interest rate (decimal) MATH 110 Sec 8-2: Interest Practice Exercises 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 months after the student must begin payments? MATH 110 Sec 8-2: Interest Practice Exercises A family is planning a vacation in 2 years. They want to 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: Interest Practice Exercises A family is planning a vacation in 2 years. They want to 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? Solution I: = MATH 110 Sec 8-2: Interest Practice Exercises A family is planning a vacation in 2 years. They want to 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? Solution I: = Answer: = 20% Solution II: = (1 + ) MATH 110 Sec 8-2: Interest Practice 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: Interest Practice Exercises The Consumer Price Index (CPI) is an inflation measure and is equal to the percent of change in the CPI between 2 years. a. What was the inflation rate from 1950 to 1990? (Round inflation rate percent to one decimal place.) MATH 110 Sec 8-2: Interest Practice Exercises The Consumer Price Index (CPI) is an inflation measure and is equal to the percent of change in the CPI between 2 years. 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: = − 1990 − 1950 = 1950 MATH 110 Sec 8-2: Interest Practice Exercises The Consumer Price Index (CPI) is an inflation measure and is equal to the percent of change in the CPI between 2 years. 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.) MATH 110 Sec 8-2: Interest Practice Exercises The Consumer Price Index (CPI) is an inflation measure and is equal to the percent of change in the CPI between 2 years. 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: = 4.759358 = 475.9358%. MATH 110 Sec 8-2: Interest Practice Exercises The Consumer Price Index (CPI) is an inflation measure and is equal to the percent of change in the CPI between 2 years. 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: = 4.759358 = 475.9358%. Note 2: The percent change in price from 1950 to 1990 is just the inflation rate from part a. MATH 110 Sec 8-2: Interest Practice Exercises The Consumer Price Index (CPI) is an inflation measure and is equal to the percent of change in the CPI between 2 years. 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: = 4.759358 = 475.9358%. Note 2: The percent change in price from 1950 to 1990 is just the inflation rate from part a. . 1990 − 1950 = 1950 MATH 110 Sec 8-2: Interest Practice Exercises Compute the monthly payment for a simple interest loan of $2660, with an annual interest rate of 8% and a term of 5 years. (Round answer to the nearest cent.) MATH 110 Sec 8-2: Interest Practice Exercises Compute the monthly payment for a simple interest loan of $2660, with an annual interest rate of 8% and a term of 5 years. (Round answer to the nearest cent.) Strategy: Step 1: Find the future value A of the loan. MATH 110 Sec 8-2: Interest Practice Exercises Compute the monthly payment for a simple interest loan of $2660, with an annual interest rate of 8% and a term of 5 years. (Round answer to the nearest cent.) 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 MATH 110 Sec 8-2: Interest Practice Exercises Compute the monthly payment for a simple interest loan of $2660, with an annual interest rate of 8% and a term of 5 years. (Round answer to the nearest cent.) Strategy: Step 1: Find the future value A of the loan. MATH 110 Sec 8-2: Interest Practice Exercises Compute the monthly payment for a simple interest loan of $2660, with an annual interest rate of 8% and a term of 5 years. (Round answer to the nearest cent.) Strategy: Step 1: Find the future value A of the loan. A = $3724 Step 2: Divide A by the total number of payments for the life of the loan MATH 110 Sec 8-2: Interest Practice Exercises Compute the monthly payment for a simple interest loan of $2660, with an annual interest rate of 8% and a term of 5 years. (Round answer to the nearest cent.) Strategy: Step 1: Find the future value A of the loan. A = $3724 Step 2: Divide A by the total number of payments for the life of the loan where # of payments = (12 / year)(5 years) = 60 MATH 110 Sec 8-2: Interest Practice 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: Interest Practice 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.) Strategy Step 1: Find amt of interest owed for 1st month. MATH 110 Sec 8-2: Interest Practice 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.) Strategy Step 1: Find amt of interest owed for 1st month. Step 2: Find total owed (Principal + Interest). MATH 110 Sec 8-2: Interest Practice 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.) Strategy Step 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. MATH 110 Sec 8-2: Interest Practice 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.) Strategy Step 1: Find amt of interest owed for 1st month. MATH 110 Sec 8-2: Interest Practice 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.) Strategy Step 1: Find amt of interest owed for 1st month. = MATH 110 Sec 8-2: Interest Practice 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.) Strategy Step 1: Find amt of interest owed for 1st month. = 1 Note: Time (t) must be in years and = 12 year. MATH 110 Sec 8-2: Interest Practice 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.) Strategy Step 1: Find amt of interest owed for 1st month. $232.92 MATH 110 Sec 8-2: Interest Practice 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.) Strategy Step 1: Find amt of interest owed for 1st month. $232.92 Step 2: Find total owed (Principal + Interest). TOTAL OWED = PRINCIPAL + INTEREST MATH 110 Sec 8-2: Interest Practice 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.) Strategy Step 1: Find amt of interest owed for 1st month. $232.92 Step 2: Find total owed (Principal + Interest). $43232.92 MATH 110 Sec 8-2: Interest Practice 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.) Strategy Step 1: Find amt of interest owed for 1st month. $232.92 Step 2: Find total owed (Principal + Interest). $43232.92 Step 3: Subtract off the 1st month’s actual payment ($700). $43232.92 - $700.00 = $42532.92