practice questions for math

Question

Your bank offers you a personal loan of $22,000 at an interest rate of 5.26% compounded semi-annually. At the end of the term, interest of $9,233.89 was charged on the loan. Calculate the term of this loan.

Meadow Company wants to invest its net profits of $115,000 for 8 years in either a credit union or a local bank. The credit union provides interest of 9.63% compounded monthly, while the local bank provides interest of 9.76% compounded semi-annually. Calculate the maturity value of the investment with:

a. Credit Union:

Round to the nearest cent

b. Local Bank:

Round to the nearest cent

c. Which of the two options will yield the highest returns?

a. Credit Union

b. Local Bank

A payment of $2,890 was due two years ago, and a payment of $1,850 is due today. What single payment three years from now would be equivalent to these original payments? Assume that money earns 3.5% compounded quarterly.

Answer 1

22,000 + 9,233.89 = 22,000(1+.0526/2)^2t

31,233.89/22,000 = 1.0263^2t

log_1.0263(31,233.89/22,000) = 2t

t = (1/2)ln(31,233,89/22,000)/ln1.0263

t = about 6.75 years