Exam 21: Savings Models

In 2000, Patti had the choice to invest $100,000 in the housing market for five years, or invest in a CD paying 3% compounded annually. If the 2000 CPI is 172.2 and the 2005 CPI is 195.0, which is the better choice?

Occasionally an economy experiences a very high inflation rate. If the inflation rate is 100%, what is the relative purchasing power of a unit of currency after one year?

A car was purchased in 1980 for $12,000. Its value in current dollars depreciates steadily at a rate of 14% per year. What will the car's value be at the beginning of 2003?

Pat invested in her employer's stock program in 1981. The annual yield for her investment was 6.5%, but the inflation rate was 7.8%. What was the real growth rate of this investment?

If the rate of a 24-month CD is 0.80% compounded daily, how much would need to be set aside in such a CD to have $15,000 at the end of 24-month term? Round to nearest cents.

What is the APY for 9.7% compounded annually?

In 1984 the inflation rate was about −0.24%. If you invested in a savings account with an annual interest rate of 9.4%, what was the real growth rate of this investment?

What is the APY for 7.5% compounded quarterly?

In Questions make the assumption that the change in housing prices exactly matches the change in the CPI. In fact, housing is only part of the CPI, and figures into the CPI through rents rather than sale prices, so this assumption may be far from correct. -When John sold a house in 2003 for $115,000, he received $20,000 more than he paid for it. When did he purchase the house? (Use Table 21.5.)

You have $2500 that you invest at 6% simple interest. What is the balance after four years?

Sindee wants to make an investment that will have a real growth rate of 9%. If the current inflation rate is 1.97%, what annual interest rate will she need to get on her investment to accomplish her goal?

In 1984 the inflation rate was about −0.24%. If you invested in a savings account with an annual interest rate of 6.8%, what was the real growth rate of this investment?

What is the rate of simple interest that would realize exactly as much as interest over the same period?

Suppose that you have $3000 on deposit at your bank at an annual rate of 1.5%. If the bank compounds continuously, how much interest do you receive after one year? Round to nearest cents.

Use the geometric series formula to find the sum of $\ {a}+ {a^2} + {a^3} + {a^4}$ [Hint: The series does not begin with 1.]

In Questions make the assumption that the change in housing prices exactly matches the change in the CPI. In fact, housing is only part of the CPI, and figures into the CPI through rents rather than sale prices, so this assumption may be far from correct. -In 1997, Howard had the opportunity to either invest $100,000 for five years in the housing market or in a CD paying 2.5%. If the 1997 CPI is 160.5 and the 2002 CPI is 179.9, which is the better investment?

The CEO of a startup company wants to offer employees a stock program with a real growth rate of 6%. If the current inflation rate is 3%, what should the annual yield for the stock program be?

Candas made an investment with a 10% annual yield. However, the real growth rate of her investment was only 8.2%. What was the inflation rate?

Merrie borrowed $500 from her parents, agreeing to pay them back when she graduated from college in four years. If she paid interest compounded daily at 16%, how much would she owe at the end of the four years?

Margaret made an investment with a 10% annual yield. However, the real growth rate of her investment was only 4.5%. What was the inflation rate?