Section PF.9 – Practice Problems
Note: If your final answer is a dollar amount then it should be rounded to the nearest cent. Round percentages to 3 decimal places (or more) as needed.
1. A bank features a savings account that has an annual percentage rate of 2.8% with interest compounded monthly. Devin deposits $9,500.00 into the account.
a. How much money will Devin have in the account in 1 year?
b. What is the annual percentage yield (APY) for the savings account?
2. A bank features a savings account that has an annual percentage rate of 5.1% with interest compounded quarterly. Miranda deposits $3,000.00 into the account.
a. How much money will Miranda have in the account in 1 year?
b. What is the annual percentage yield (APY) for the savings account?
3. Calculate the APY for an account that pays 3.6% compounded monthly.
4. Calculate the APY for an account that pays 5.8% compounded semi-annually.
5. Calculate the APY for an account that pays 4.7% compounded quarterly.
6. Calculate the APY for an account that pays 2.3% compounded quarterly.
7. Calculate the APY for an account that pays 5.9% compounded annually.
8. Calculate the APY for an account that pays 6%:
a. compounded daily
b. compounded monthly
c. compounded annually
9. Calculate the APY for an account that pays 15%:
a. compounded daily
b. compounded monthly
c. compounded annually
10. Two banks are offering different investment opportunities. Bank A offers an account that pays 4.85% interest compounded monthly. Bank B offers an account that pays 4.8% interest compounded daily. Determine the APY for each and decide which is a better investment opportunity.
11. Two banks are offering different investment opportunities. Bank A offers an account that pays 7% interest compounded quarterly. Bank B offers an account that pays 6.95% interest compounded daily. Determine the APY for each and decide which is a better investment opportunity.
12. Two banks are offering different investment opportunities. Bank A offers an account that pays 2.03% interest compounded annually. Bank B offers an account that pays 2% interest compounded daily. Determine the APY for each to decide which is a better investment opportunity.
