What Is Instructor Graded Assignment

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Unit 6: Instructor Graded Assignment

Compound Interest

In this and future Instructor Graded Assignments you will be asked to use the answers you found in the Unit 1 Assignment.

Note: For these questions you need to cite a reliable source for information, which means you cannot use sites like Wikipedia, Ask.com®, and Yahoo® answers. If you do use those sites the instructor may award 0 points for your response.

The Assignment problems must have the work shown at all times. The steps for solving the problems must be explained. Failure to do so could result in your submission being given a 0. If you have any questions about how much work to show, please contact your instructor.

Assignments must be submitted as a Microsoft Word® document and uploaded to the Dropbox for Unit 6. Please type all answers directly in this Assignment below the question it applies to.
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Note: All interest rates are to be assumed to be yearly interest rates.

Question 1
(10 points)
1. You decide to invest $15000 into a bank account that that is compounding its interest monthly. Assuming the bank is paying out an interest rate of the current prime rate - 1% (In the event that prime - 1% is less than 1%, use 1%), and the investment is for 5 years

a) How much money (total) do you have after the 5 years pass?

b) How much do you earn in interest over the 5 years?

Question 2
(10 points)
2. You wish to have $500,000 saved up in 30 years. Assuming that you can get an interest rate of prime + 5% on your investment (compounded quarterly.)

a) How much do you need to invest today to have $500,000 30 years in the future?

b) How much of that total is interest?

Question 3
(10 points)
3. You borrow $50,000 at 5% interest (compounded daily).

a) After 1 year passes, you pay off $25000 of the loan. How much do you still owe on the loan?

b) After another year passes, you wish to pay off the loan. How much do you need to pay to pay it off?


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