Simple Interest / Compound Interest / Regular Annuities

1) Adil invested $10000 for 10 years at 5% /a compounded annually. How much does he have at
the end of 10 years?

2) Robyn purchased a Canada Savings Bond for $1400 with a 3 year term at 6% /a, compounded
semi-annually. How much does she have at the end of the term?

3) Laura borrowed $2000 at 10% /a compounded annually. She will pay the loan back in full in 2
years.
a) How much will she have to pay back?
b) How much of what she pays back will be interest?

4) Rachel bought a $4000 diamond ring that the jeweler says will appreciate 2% per year. How
much will her ring be worth in 25 years?

5) When Clay was born, his parents invested $2000 at 4.4% /a compounded quarterly. How much
will he have on his 18th birthday?

6) Jacob has his eye on a stereo which costs $3000. He only has $1400 saved up. He borrows the
rest from his sister who charges him 12% /a interest compounded monthly until he can pay the
loan back in a year. How much does the stereo actually cost him altogether (including interest)?

7) When Patrick was born, his grandparents started a College fund. They invested the money at
8% /a interest compounded semi-annually. When he turned 18, the money had grown to
$10,000. How much did his grandparents originally invest?

8) Adriana must have the new iPhone. She has no money, so she borrows it from the bank which
charges 12% /a interest compounded quarterly. When the loan comes due in 2 years, she pays
the bank $780. What was the price of the phone?

9) Mykala would like to be a millionaire by the time she is 45 years old. She is 16 years old today.
How much would she have to invest today at 6% /a compounded annually to reach her goal?

10) Leanna wants to start a hair-styling business in 3 years. She figures that she will need $10,000
to start. Bank A offers her a term deposit with interest at 6% /a compounded semi-annually.
Bank B offers her a term deposit with interest at 5.75% /a compounded quarterly. Which bank
should she choose?
11) When Connor turned 13 years old, his grandmother deposited $500 into his savings account
paying 5% /a compounded yearly. Each birthday, she has deposited $500 more. How much will
he have in his account on his 18th birthday?

12) Derek purchased a sound system at Stereos R Us on a Payment Play for $1000 /year for three
years. The plan is really a loan that involves interest calculated at 12%/a compounded yearly.
What is the actual cost of the system if he pays for it right away?

13) Emma is saving to buy a car in three years. She deposits $400 every month into a savings
account earning interest at 6% compounded monthly. How much money will she have in three
years?

14) Asrat deposits $750 at the end of every three months for 6 years at an interest rate of 4.25% /a
compounded quarterly. What is the accumulated amount of the investment?

15) Broughan is purchasing some furniture for her new apartment. The store offers a payment plan
that consists of $200 payments made at the end of every three months for 2 years. The plan is
really a loan that involves interest calculated at 8% compounded quarterly. What does the the
furniture actually cost her in the end?

16) Mother Teresa High School wishes to establish a scholarship fund which will award a $500
scholarship at the end of each school year for the next eight years. If the fund earns 5.5% /a
compounded annually, what does the school need to invest now to pay for the fund?

17) Amy would like to have $1,000,000 in her RRSP when she retires at age 65. Because of her
advanced Math skills, she knows that she should start saving early and take full advantage of the
exponential growth of her savings. So… she has decided to start saving at age 20. With interest
at 5% /a compounded monthly, how much will she have to deposit each month to ensure that
she reaches her goal of a “Million Dollars by 65”?

18) Edward deposits $100 each month into a savings account that pays 3% /a interest compounded
monthly. What will his savings be in one year if he makes his first deposit in one month from
today?

19) Everett makes deposits of $2,000 semi-annually into an account that pays 4% /a interest
compounded semi-annually.
a) How much money will be in the account after a 5-year term?
b) How much interest will he have earned over the 5-year term?

20) Donovan’s goal is to be a millionaire when he turns 50. When he was 29, he started investing
$1500 each month at 8% /a compounded monthly. Assuming the interest rate remains at 8%,
determine if he will reach his goal.
21) Zackery buys a new van. He borrows $30,000 at 9.6% /a compounded monthly and will make
payments at the end of each month for 7 years. What is his monthly payment?

22) How many years will it take for John to become a millionaire if he invests $1000 per month into
an account that pays 4% /a compounded monthly?

23) Saad borrowed $26,000 to purchase a car. He makes a $3,000 payment every 6 months for 5
years. Determine the interest rate per annum, compounded semi-annually.

24) Tyler must begin repaying his student loan. His monthly loan payments of $200 will be
withdrawn at the end of each month from an account earning 6% /a interest compounded
monthly. How much must he deposit in the account today so that the loan payments can be
withdrawn for 1 year?

25) Determine the future value of Cameron’s 20 annual deposits of $1,000 if the deposits earn 8%
interest per annum compounded annually.

26) Determine the monthly payments Hailey must make to accumulate a future value of $10,000 in
four years if the payments earn 6.5% interest per annum, compounded monthly.

27) Ellen’ $10,000 loan is repaid with monthly payments of $334.54 for three years. Determine the
interest rate per annum compounded monthly.

28) Determine the total amount of interest earned on James’ annuity consisting of quarterly
deposits of $1,500.00 for ten years, if the annuity earns 9% interest per annum compounded
quarterly.

29) Mrs. Robinson and Mrs. McNeil are each paying off loans of $5,000.00. Mrs. Robinson makes
monthly payments of $75.00 and interest is charged at 9% per annum compounded monthly.
Mrs. McNeil pays off the loan in the same amount of time, but her monthly payments are only
$65.00. Determine the annual interest rate that Mrs. McNeil is charged.

30) Mateo’s parents want to set up an annuity to help him with his college expenses. The annuity
will allow him to withdraw $300 every month for 4 years. The first withdrawal will be 1 month
from now. The annuity earns 3.5% per year compounded monthly. What principal should his
parents invest now to pay for the annuity?
Answers:

1. $16288.90
2. $1671.67
3. a. $2420.00 b. $420.00
4. $6562.42
5. $4396.56
6. $3202.92
7. $2436.69
8. $615.74
9. $184557.00
10. Bank B
11. $2762.82
12. $2401.83
13. $15734.44
14. $20380.72
15. $1465.10
16. $3167.28
17. $493.48
18. $1216.64
19. a. $21899.44 b. $1899.44
20. No. ($975538.12)
21. $491.86
22. 36.72 years
23. 5.38%
24. $2323.79
25. $45761.96
26. $182.98
27. 12.5%
28. $35679.26
29. 4.96%
30. $13419.22