10.3 Compound Interest 613 24. Investing Prize Winnings Marcella wins third prize in the Clearinghouse Sweepstakes and receives a check for $250,000. After spending $10,000 on a vacation, she decides to invest the rest in a money market account that pays 1.5% interest compounded monthly. How much money will be in the account after 10 years? $278,814.10 25. House Down Payment Tamara invested $10,000 in a money market account with an interest rate of 1.75% compounded semiannually. Five years later, Tamara withdrew the full amount to put toward the down payment on a new house. How much did Tamara withdraw from the account? $10,910.27 26. Investing a Signing Bonus Joe just started a new job and has received a $5000 signing bonus. Joe decides to invest this money now so that he can buy a new motor scooter in 5 years. If Joe invests in a 5-year CD paying 3.35% interest compounded quarterly, how much money will he receive from his CD in 5 years? $5907.60 27. Investment Interest Velma invests $10,000 in a 48-month CD that pays 5.13% interest compounded monthly. At the end of the 48 months, Velma receives the interest that she earned on the CD and reinvests the original $10,000 into another CD. How much interest did Velma receive? $2272.34 28. Forgoing Interest Rikki borrowed $2500 from her daughter, Lynette. She repaid the $2500 at the end of 2 years. If Lynette had left the money in a bank account that paid an interest rate of 1.5% compounded monthly, how much interest would she have accumulated? $76.09 29. Investing Gifts and Scholarships Cliff just graduated from high school and has received $800 in gifts of cash from friends and relatives. In addition, Cliff received three scholarships in the amounts of $150, $300, and $1000. If Cliff takes all his gift and scholarship money and invests it in a 24-month CD paying 2% interest compounded daily, how much money will he have when he cashes in the CD at the end of the 24 months? $2341.82 30. Little League Braden River Little League held various fund raisers and received the following amounts of money: $450 from a car wash, $278 from a bake sale, and $327 from a used equipment sale. The league decides to invest the total of these amounts in a 3-year CD that pays 1.8% interest compounded daily. How much money will the league receive from the CD in 3 years? $1113.53 31. Money Market Choice Prospero Bank advertises a money market account that pays 1.9% interest compounded quarterly. Fuerza Bank advertises a money market account that pays 1.8% compounded daily. a) Determine the annual percentage yield for the Prospero Bank money market account. 1.91% b) Determine the annual percentage yield for the Fuerza Bank money market account. 1.82% c) Assuming all other factors are equal, which bank’s money market account would be the better investment? Prospero Bank 32. Money Market Choice Summit Credit Union advertises a money market account that pays 0.750% compounded daily. ESL Credit Union advertises a money market account that pays 0.749% compounded semiannually. a) Determine the annual percentage yield for the Summit Credit Union money market account. 0.753% b) Determine the annual percentage yield for the ESL Credit Union money market account. 0.750% c) Assuming all other factors are equal, which credit union’s money market would be the better investment? Summit Credit Union 33. Investment Choice M&T Bank advertises a CD that pays 2.23% compounded quarterly. Key Bank advertises a CD that pays 2.25% compounded semiannually. a) Determine the annual percentage yield for the M&T Bank CD. 2.25% b) Determine the annual percentage yield for the Key Bank CD. 2.26% c) Assuming all other factors are equal, which bank’s CD would be the better investment? Key Bank 34. Investment Choice Confiance Bank advertises a 1-year CD that pays 1.75% compounded semiannually. Firme Bank advertises a 1-year CD that pays 1.74% compounded monthly. a) Determine the annual percentage yield for the Confiance Bank CD. 1.76% b) Determine the annual percentage yield for the Firme Bank CD. 1.75% c) Assuming all other factors are equal, which bank’s CD would be the better investment? Confiance Bank 35. Verifying APY Suppose you saw a sign at your local bank that said, “2.4% rate compounded monthly—2.6% Annual Percentage Yield (APY).” Is there anything wrong with the sign? Explain. Yes, the APY should be 2.43%. 36. Verifying APY Suppose you saw an advertisement in the newspaper for a financial planner who was recommending a certificate of deposit that paid 4.5% interest Suzanne Tucker/Shutterstock
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