Questions for the quiz on Thursday:

1. If you begin by investing $3000 for 6 years at 4% interest in a savings bond, how much money will you get total by then end of the 6 year period?

For a bond, each year it earns $3000*.04=$120, so over 6 years it will earn $120*6=$720. The total you get includes your initial investment, so you get $3720.

2. If you begin by investing $3000 for 6 years at 3% interest in a CD, how much money will you get total by then end of the 6 year period?

This one has to be done year-by-year unless you have a scientific calculator (if you remember how to do it using exponents from an earlier class, you can do that instead)

year amount earning interest interest rate interest earned total value
0   .03 0 3000
1 3000 .03 90 3090
2 3090 .03 92.7 3182.70
3 3182.70 .03 95.48 3278.18
4 3278.18 .03 98.35 3376.53
5 3376.53 .03 101.30 3477.83
6 34.77.83 .03 104.34 3582.17

Answer: $3582.17

3. If you invest $800, and at the end of 1 year, you have $830, what annual interest rate did you earn?

830-800=30

30/800=.0375

3.75%

4. Each of the graphs below show the total amount you have from an investment in either bonds (simple interest) or CDs (compound interest. Explain for each graph whether it is the graph of a bond investment or a CD investment, and how you know:

A.

Bond: it is growing in a straight line

 B.

CD: the growth is slightly curved (not straight)