Tecnológico de Monterrey

PM6014 Mathematics for Decision Making

Activity: Compound Interest
Created by Verónica Rojas Jañez
Translated by Ing. Ziad Najjar
Source: Mathematics for Decision Making. Ferrara R.,
Rodríguez A., Romo L., Sevilla F. Ed. IIDEA Pentágono,
México, 2017.

1. Find the balance after 5 years if a principal of $4,800,000, is invested at a 9.6% rate
compounded annually.

a. A=P(1+(r/n) )^(n*t)

i. P = 4,800,000

ii. r = 0.096

iii. t = 5

iv. n = 1

b. A = 7,590,912.898

2. What is the amount to invest at 8.2% compounded monthly, if we wish to have $145,000
four years from now?

a. P = A / (( 1 + ( r / n ) ) ^ ( n * t ))

i. A = 145,000

ii. r = 0.082

iii. n = 12

iv. t = 4

b. P = 104,569.2289

3. Find the annual interest rate that is applied upon an investment of $290,000, that turns
into $520,000 after 8 years, if compounded weekly.

a. r = n [( (A / P ) ^ (1 / ( n * t ) ) ) - 1 ]

i. P = 290,000

ii. A = 520,000

iii. t = 8

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 iv. n = 52.143

b. r = 7.29%

4. What is the time needed for a savings account with $12,000 to duplicate itself, if a 12.6%
rate compounded yearly is applied?
a. t = ln ( A / P ) / n ( ln ( 1 +( r / n ) ) )
i. P = 12,000
ii. A = 24,000
iii. r = 0.126
iv. n = 1
b. t = 6 years

5. Abigail invests $432,000 in an account that grants 13.8% compounded annually. Which is
the amount she will have after six years and a half?
a. A = P ( 1 + ( r / n ) ) ^ ( n * t )
i. P = 432,000
ii. r = 0.138
iii. t = 6.5
iv. n = 1
b. A = 1,000,940.934

6. Dylan wants to purchase a car that costs $305,000. Currently he has $238,000 only. If he
invests his money at a 21.5% compounded semiannually, how long will it take him to
gather the amount he needs for car?

a. t = ln ( A / P ) / n ( ln ( 1 +( r / n ) ) )

i. P = 238,000

ii. r = 0.215

iii. n = 2

iv. A = 305,000

b. t = 1.5 years

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