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2 January, 17:38

9.

Diane Barvello deposits $1,380 in a certificate of deposit for 3 years.

Find the compound amount if the interest rate is 5% compounded daily.

$1,587.00

$1,603.31

$1,597.53

$1,603.32

10.

John Wong makes $63,800 per year maintaining a self-storage business.

He was notified of a 3.3% raise in a year in which the CPI index increased

by 4.4%.

Find the gain or loss in his purchasing power.

loss of $701.80

gain of $701.80

loss of $2105.40

gain of $2105.40

11.

Angler's Edge, worth $12 million, is expected to grow at 5% per year compounded annually for 7 years.

Find the future value to the nearest million.

$16 million

$18 million

$17 million

$19 million

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Answers (1)
  1. 2 January, 17:52
    0
    Question 1:

    A = P{1+r/365}^n

    P = $1,380; r = 5% = 0.05; n = 3*365 = 1095 (since it is compounded daily)

    Substituting;

    A = 1380 (1+0.05/365) ^1095 = $1,603.31

    Question 2:

    Earning in base year = $63,800

    Earning in target year = 63,800*1.033 = $65,905.40

    Purchasing power = Base year earning/Target year earning = {63800/65905.4}*100 = 96.81% which is equivalent to 65905.4-63800 = $2,105.40 loss in purchasing power.

    Question 3:

    A = P{1+r}^n, where P = $12 million, r = 5% = 0.05, n = 7 years

    Then,

    A = 12 (1+0.05) ^7 = 16.89 ≈ $17 million
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