Time Value of Money Practice – Basic Calculator Method
Read each scenario. Determine which formula you should use to solve the problem. Complete the calculation to solve each of the mathematical problems. Round each answer to two decimal places.
Simple Interest Formula
Compound Interest Formula – Single Deposit
Compound Interest Formula – Equal Periodic Investments
Scenarios
1. Camila deposited $600.00 into a savings account one year ago. She has been earning 1.2% in annual simple interest. Complete the following calculations to determine how much Camila’s money is now worth.
Which formula should you use?
· Simple interest
· Compound Interest – single deposit
· Compound interest – periodic investments
P =
r =
n =
t =
FV =
2. Felipe’s grandparents have given him $1,500.00 to invest while he is in college to begin his retirement fund. He will earn 2.3% interest, compounded annually. What will his investment be worth at the end of four years?
Which formula should you use?
· Simple interest
· Compound Interest – single deposit
· Compound interest – periodic investments
P =
r =
n =
t =
FV =
3. Nicole put $2,000.00 into an account that pays 2% interest and compounds annually. She invests $ XXXXXXXXXXevery year for five years. What will her investment be worth after five years?
Which formula should you use?
· Simple interest
· Compound Interest – single deposit
· Compound interest – periodic investments
P =
r =
n =
t =
FV =
4. Robert opens an account at a local bank. The account pays 2.4% interest compounded monthly. He deposits $100 every month for three years. How much is in the account after three years?
Which formula should you use?
· Simple interest
· Compound Interest – single deposit
· Compound interest – periodic investments
P =
r =
n =
t =
FV =
5. When Daisy turned 15, her grandparents put $10,000 into an account that yielded 4%, compounded quarterly. When Daisy turns 18, her grandparents will give her the money to use toward her college education. How much will Daisy receive on her 18th birthday?
Which formula should you use?
· Simple interest
· Compound Interest – single deposit
· Compound interest – periodic investments
P =
r =
n =
t =
FV =