Review Chapters 4 & 8
Topics:
How numbers deceive (section 3E)
Simple interest
Compound interest
APY
Savings plans
Loan payments
Growth: linear vs exponential
Real population growth
Logarithmic scales
1. How much could you save if you purchased a $1000 5-year savings
certificate that paid 5% compounded quarterly?
2. What is the value after 15 years if you deposit $5000 for your child’s
education and the interest is guaranteed at 16% compounded
continuously?
3. Suppose that you invest $2000 in an account with an APR of 5.9%
compounded daily. What is the APY?
4. Suppose a sobriety test is 95% accurate. Of the 1000 drinking drivers
tested, only 75 actually were above the legal limit. Complete the table
below. What percent of the legally intoxicated drivers were not identified
by the sobriety test?
drunk ‘not drunk’ Total
Sobriety test +
Sobriety test –
Total
1,000
5. Suppose you see a car with an advertised price of $18,490 with payments
of $480 per month for 5 years. How much total interest would you pay?
6. Suppose you have a balance of $3200 on a credit card that charges an
APR of 21% compounded monthly. If you want to repay the balance in 2
years, how much should you pay each month? Assume that you charge
no additional expenses to the card. How much total interest would you
pay?
