Contemporary Mathematics for Business and Consumers, Third Edition

Robert A. Brechner
Copyright © 2003 Thomson/South-Western

Level 1
Chapter 12 - Section I - Exercise 11

Grove Isle Savings & Loan is paying 6% interest compounded monthly. How much
will $100 deposited at the end of each month be worth after 2 years?

Number of years = 2

Periods per year = 12

Compounding periods = 24

Nominal rate = 6.0%

Interest rate per period = 0.5%

Table factor = 1.10500 -100

Annuity payment = -$100.00

Future value = $2,543.20

0
Contemporary Mathematics for Business and Consumers, Third Edition
Robert A. Brechner
Copyright © 2003 Thomson/South-Western

Level 2
Chapter 12 - Section I - Exercise 12

Emory Distributors, Inc., deposits $5,000 at the beginning of each 3-month period
for 6 years in an account paying 8% interest compounded quarterly.

a. How much will be in the account at the end of the 6-year period?

Number of years = 6

Periods per year = 4

Compounding periods = 24

Nominal rate = 8.0%

Interest rate per period = 2.0%

Table factor =

Annuity payment =

Account value =

b. What is the total amount of interest earned in this account?

Total investment =

Total interest earned =

Contemporary Mathematics for Business and Consumers, Third Edition
Robert A. Brechner
Copyright © 2003 Thomson/South-Western

Level 2
Chapter 12 - Section II - Exercise 13

As the chief accountant for the Worthington Corporation, you have estimated that the
company must pay $100,000 income tax to the IRS at the end of each quarter this
year. How much should be deposited now at 8% interest compounded quarterly
to meet this tax obligation?

Number of years =

Periods per year =

Compounding periods =

Nominal rate =

Interest rate per period =

Table factor =

Annuity payment =

Amount to deposit now =

Contemporary Mathematics for Business and Consumers, Third Edition
Robert A. Brechner
Copyright © 2003 Thomson/South-Western

Level 3
Chapter 12 - Section II - Exercise 14

Georgiann Adams is the grand prize winner in a college tuition essay contest sponsored
by a local scholarship fund. The winner receives $2,000 at the beginning of each year
for the next 4 years. How much should be invested at 7% interest compounded
annually to pay Georgiann the prize?
Contemporary Mathematics for Business and Consumers, Third Edition
Robert A. Brechner
Copyright © 2003 Thomson/South-Western

Level 1
Chapter 12 - Section III - Exercise 12

Elizabeth Robinson bought a new Nissan Altima for $15,500. She made a $2,500 down payment and
is financing the balance at the Mid-South Bank over a 3-year period at 12% interest.
As her banker, calculate what equal monthly payments will be required by Elizabeth to
amortize the car loan.

Number of years =

Periods per year =

Compounding periods = 0

Nominal rate =

Interest rate per period = #DIV/0!

Purchase price =

Down payment =

Table factor =

Present value = $0.00

Monthly payment = #DIV/0!

Contemporary Mathematics for Business and Consumers, Third Edition
Robert A. Brechner
Copyright © 2003 Thomson/South-Western

Level 2
Chapter 12 - Section III - Exercise 13

Green Thumb Landscaping buys new lawn equipment every 3 years. It is estimated
that $25,000 will be needed for the next purchase. The company sets up a sinking
fund to save for this obligation.

a. What equal payments must be deposited every 6 months if interest is 8%

compounded semiannually?
Note: Use Excel's Round function to calculate the payment. Then use this
rounded value for your calculations in part b.

Number of years =

Periods per year =

Compounding periods =

Nominal rate =

Interest rate per period =

Table factor =

Future value =

Sinking fund payment =

b. What is the total amount of interest earned by the sinking fund?

Total amount of payments =

Total interest earned =

Contemporary Mathematics for Business and Consumers, Third Edition
Robert A. Brechner
Copyright © 2003 Thomson/South-Western

Level 3
Chapter 12 - Section III - Exercise 18

You are the vice president of finance for Casablanca Enterprises, Inc., a manufacturer
of office furniture. The company is planning a major plant expansion in 5 years. You
have decided to start a sinking fund to accumulate the funds necessary for the project.
Current bank rates are 8% compounded quarterly. It is estimated that $2,000,000 in
today's dollars will be required; however, the inflation rate on construction costs and
plant equipment is expected to average 5% per year for the next 5 years.

a. Use the compound interest concept from Chapter 11 to determine how much will
be required for the project, taking inflation into account.

b. What sinking fund payments will be required at the end of every 3-month period to
accumulate the necessary funds?
Contemporary Mathematics for Business and Consumers, Third Edition
Robert A. Brechner
Copyright © 2003 Thomson/South-Western

Level 2
Chapter 12 - Assessment Test - Exercise 18

The Carvers buy a home for $120,500. After a 15% down payment, the balance is
financed at 8% interest for 9 years.

a. What equal quarterly payments will be required to amortize this mortgage loan?
Note: Use Excel's Round function to calculate the payment. Then use this
rounded value for your calculations in part b.

Mortgage =

Down payment percent =

Amount financed =

Number of years =

Periods per year =

Compounding periods =

Nominal rate =

Interest rate per period =

Table factor =

Payment =

b. What is the total amount of interest the Carvers will pay on the loan?

Total paid =

Total Interest =