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WORKSHEET #2 Simple and Compound Interest: Name

This document appears to be a worksheet for a financial literacy class containing 10 problems related to simple and compound interest calculations. The problems involve calculating interest earned on various investments over different time periods, comparing effective annual interest rates for investments with different compounding periods, graphing investment growth over time, and advising which of two investment options would generate a higher return factoring in differences between simple and compound interest.

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frederick lipon
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1K views6 pages

WORKSHEET #2 Simple and Compound Interest: Name

This document appears to be a worksheet for a financial literacy class containing 10 problems related to simple and compound interest calculations. The problems involve calculating interest earned on various investments over different time periods, comparing effective annual interest rates for investments with different compounding periods, graphing investment growth over time, and advising which of two investment options would generate a higher return factoring in differences between simple and compound interest.

Uploaded by

frederick lipon
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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PC 11 LG 1 – 2 Financial Literacy Name ___________________

WORKSHEET #2 Simple and Compound Interest


Name: ___________________________

/50
1 If $3200 is invested for 9 months at 5% p.a., 2
calculate:
(a) the amount of simple interest earned

(b) the total amount at the end of the term.

2 How long will it take to earn $500 simple 2


interest, investing $8500 at 4.25% p.a.?

3 Johnny invested $60 000 in Ski International 1


debentures. He earned 6.5% p.a. which is paid
quarterly. How much interest will he earn over
5 years?

1
PC 11 LG 1 – 2 Financial Literacy Name ___________________

4 Kim has $18 000 to invest for 2 years. She has 9


the following options:
(a) A term deposit at 4.5% compounded
annually.

(b) Shares, paying a rate of 4.48% per annum


with dividend paid quarterly.

(c) A building society account, paying a


return of 4.56% per annum with monthly
rests.

(d) A business venture with guaranteed


return of 3.65% p.a. and interest paid
daily.

Advise Kim which option to take if all the


investments are equally secure.

2
PC 11 LG 1 – 2 Financial Literacy Name ___________________

5 (a) Calculate the compound interest on a 11


term deposit of $10 000 at the rate of
6% p.a. for 3 years when the investment
is compounded

(i) annually
(ii) semi-annually
(iii) quarterly
(iv) monthly
(v) daily.

(b) Which is the best investment option?

3
PC 11 LG 1 – 2 Financial Literacy Name ___________________

6 Colin invests $5000 for 5 years at 5.25% p.a. Compounding monthly 2


How much more would he collect at the end of
the 5-year period if the money invested is
compounding monthly rather than
compounding annually?

Compounding yearly

7 The table below shows the yearly growth of an 5


investment of $10 000 over a period of 5 years
at 3.75% p.a. interest compounded annually.
Time
0 1 2 3 4 5
(years)
Value
10 000 10 375 10 764 11 168 11 587 12 021
($)

Graph the value of the investment over time.

4
PC 11 LG 1 – 2 Financial Literacy Name ___________________

8 Chris invests $20 000 at 6% p.a. with interest 8


compounding annually.
(a) Complete the table below to show the
future value at the end of each year.

No. of
1 2 3 4 5
years
Future
value

(b) Draw a graph of the future value of the


investment against time.

9 An interest rate of 4.5% p.a. compounding 5


quarterly is equivalent to what effective interest
rate?

5
PC 11 LG 1 – 2 Financial Literacy Name ___________________

10 Marilyn can invest in two different funds: 5


(a) 6% p.a. simple interest

(b) 5.75% p.a. compound interest with


monthly rests.

She is inclined to choose the 6% p.a. simple


interest because this is a higher value. Is this a
wise choice? Explain your answer.

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