I

5.7 Compound Interest 313

illS 23-26, which of the [WO rales would yield -Ihe larger lamOlml in I year?
with a principal of $10,000 in each i1lstance.]
1
ompounded quarterly or 64'% compounded annually
24. 9% compounded qU3I1erly or compounded annually
_compounded monthly or 8.8% compounded daily
26. 8% compounded semiannually or 7.9% compounded daily
27-30, find the effecti ve rale of ilaeresi.
5% compounded quarterly
.-. ; 6% compounded monthly
.. _5% compounded continuously
o' t rate of interest compounded annually is required to
uble an investment in 3 years ?
at rate of interest compounded annually is required to
.- -!Ible an investment in 6 years?
n at rate of interest compounded annually is required to
nple an investment in 5 years?
'hat rate of interest compounded annually is required to
Ie an investment in 10 years ?
1imc l<equired 10 a Goal If Tanisha has $100 to in
"5ItS1 at 8% per annum compounded monthly, how long will it
before she has $150? If the compounding is continuous.
...JK long will it be?
.. une Required 1.0 Reach a If Angela has $100 to in
. - I at 10% per annum compounded monthly, how long will
- be before she has $175? If the compounding is continuous,
w; long will it be?
me Required to Reach a Goal How many years will it
cake for an initial investment of $10,000 to grow to $25,000?
-sume a rat e of interest of 6% compounded continuously.
'Timl' Required In Reach a Goal How many years will it
" -e for an initial investment of $25,000 to grow to $80,000?
.s-sume a rate of interest of 7% compounded continuously.
rice Appreciation of Homes What will a $90,000 house
st 5 years from now if the price appreciation for homes
r a
"" er that period averages 3% compounded annually?
('rulit Card Interest Sears charges 1.25% per month on the
enpaid balance for customers with charge accounts (interest
is compounded monthly). A customer charges $200 and does
Olot pay her bill for 6 months. What is the bill at that time?
_J\ing 1'0l' a Car Jerome will be buying a used car for
. S15,000 in 3 years. How much money should he ask his par
:ly
nts for now so that , if he invests it at 5 % compounded con
tinuously, he will have enough to buy the car?
lthly
otT a Lmm John will require $3000 in 6 months to
. ay off a loan that has no prepayment privileges. If he has
Ihe $3000 now, how much of it should he save in an account
paying 3 % compounded monthly so that in 6 months he will
have exactly $3000? .
':. 3;:;. (a) How long does it take for an investment to double in
value if it is invested at 8% compounded monthly?
(b) ::Iow long does it take if the interest is compounded con
tInuously?
36. (a) l?ng does it take for an investment to triple in value
If It IS Invested at 6% compounded monthly?
(b) How long does it take if the interest is compounded con
tmuously?
37. What rate of interest compounded quarterly will yield an
effectIve lDterest rate of 7%?
38. .rate of interest compounded continuously will yield an
effective interest rate of 6%?
47. Return on a Stock George is contemplating the purchase
of 100 shares of a stock selling for $15 per share. The stock
pays no dividends. The history of the stock indicates that it
grow at an annual rate of 15% per year. How much
Wll! the 100 shares of stock be worth in 5 years?
48. an Investment A business purchased for $650,000
ill 2001 IS sold in 2004 for $850,000. What is the annual rate of
return for this investment?
'9. Comparing Sa\ings Plans Jim places $1000 in a bank
account .that pays 5.6% compounded continuously. After
1 year. wlll he have enough money to buy a computer system
that costs $1060? If another bank will pay Jim 5.9% com
pounded monthly, is this a better deal?
iO. Sa\ings Phms On January 1, Kim places $1000 in a certifi
cate of deposit that pays 6.8% compounded continuously and
matures m 3 months. Then Kim ?laces the $1000 and the in
terest in a passbook account that pays 5.25 % compounded
monthly. How much does Kim have in the passbook account
onMa,:! \,1
51. Comp,,-l'ing IRA hwcstmcnts Will invests $2000 in his IRA
in a bond trust that pays 9% interest compqunded semiannu
ally. His friend Henry invests $2000 in his IRA in a certificate
of deposit that pays S.!. % compounded continuously. Who
2
has more money after 20 years, Will or Henry?
52. Comparing Two Aiternathe, Suppose that April has access
to an investment that will pay 10% interest compounded con
tinuously. Which is better: to be given $1000 now so that she
can take advantage of this investment opportunity or to be
given $1325 after 3 years')
ANSWERS Section 5.8 AN43
61. {2.79} 63. {- 0.57} 65. {-0.70} 67. {0.57} 69. {0.39, l.00} 71. {1.32} 73. {1.31} 75. {l} 77. {16} 79. {-I, n81. {O}
J I} In 5 In 3 } {
83. {In(2 + v'5)} "" {l.444} 85'1 e
lnlS
"" {1.921} 87. (a) {5},(5,3) (b) {5},(5,4) (e) {l},yes,at(I, 2) (d) {5} (e) -11
89. (a) 91. (a), (b)
f(x) = 3'
93. (a), (b)
f (x) = 3' + 1
y
22
g(x) = 2x+2
5 x
x
x -3
-5
3
-5
-4
-3 3
-4
(b) (0.710,6.541) (e) (lOg3 10, 10) (e) G,2v2)
(e) {xix> 0.710) or (0.710, (0)
95. (a) (b) {x ix < 2} or (-(X), 2) 97. (a) 2010 99. (a) After 2.4 yr
(b) 2027 (b) After 6.5 yr
f(x) = 2' _ 4
(e) After 10 yr
-5 5 x
-5
5.7 Assess Your Understanding (page 312)
1
3. $108.29 5. $609.50 7, $697.09 9. $12.46 11. $125.23 13. $88.72 15. $860.72 17. $554.09 19, $59.71 21. $361.93 23. 6-% compounded
4
annually 25. 9% compounded monthly 27. 5.095% 29. 5.127% 31. 25.992% 33. 24.573% 35. (a) About 8.69 yr (b) About 8.66 yr
37. 6.823% 39. 5.09 yr; 5.07 yr 41. 15.27 yr or 15 yr, 3 mo 43. $104,335 45. $12,910.62 47, About $30.17 per share or $3017 49. Not quite. Jim
will have $1057.60. The second bank gives a better deal, since Jim will have $1060.62 after 1 yr. 51. Will has $11,632.73; Henry has $10,947.89.
53. (a) $49,581 (b) $33,235 55. Approximately $602 billion 57. $940.90 59. 2.53% 61. 34.31 yr 63. (a) $1364.62 (b) $1353.35
65. $4631.93 67. (a) 6.12 yr (e) mP 69. (a) 2.51 % 71. 22.7 yr = p(1 + ~ r
(b) 18.45 yr m = (1 + ~ r (b) In 2022 or after 27 yr
In m = In(
1
+ ~ r
In m = nl In( 1 + ~ )
lnm
I = - ~ - - : -
n In( 1 + ~ )
5.8 Assess Your Understanding (page 324)
1. (a) 500 insects (b) 0.02 = 2% per day (e) About 611 insects (d) After about 23.5 days (e) After about 34.7 days 3. (a) -0.0244 = -2.44%
kr kr
per year (b) About 391.7 g (e) After about 9.1 yr (d) 28.4 yr 5. (a) N(l) = No e (b) 5832 (e) 3.9 days 7. (a) N(/) = No e (b) 25,198
9. 9.797 g 11. 9727 yr ago 13. (a) 5:18 PM (b) About 14.3 min (e) The temperature of the pan approaches 70F. 15. 18.63C; 25.1 C
17. 1.7 ppm; 7.17 days or 172 hr 19. 0.26 M; 6.58 hr or 395 min 21. 26.6 days 23. (a) 90% (b) 12.86% (e) 40.70% (d) 2012 25. (a) 1000 g
(b) 43.9% per hour (e) 30 g (d) 616.6 g (e) After 9.85 hr (f) About 7.9 hr
27. (a) 9.23 X 10-
3
, or about 0 (d) 57.91,43.99,30.07
(b) 0.81, or about 1 6
(e) 5.01, or about 5
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