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Solutions to Chapter 4 Problems
4-1 Simple interest:
I = PiN = $9,000 (0.08)(5) = $3,600
Compound interest:
I = P (F/P, 8%, 5) – P = $9,000 (1.4693) − $9,000 = $4,223.70
There is a difference in the amount of interest ($4,223.70 − $3,600 = $823.70) earned because compounding allows interest from previous years to earn additional interest, whereas simple interest only considers the original principal. 1 / 4
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4-2 F =$10000 * (1+0.08)^30 = $100626.56
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Copyright © 2025, Inc. Pearson Education 4-3 Compound interest causes your savings to grow exponentially without additional funding.Compound interest on your loans increases the total amount of interest repaid over time. 3 / 4
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4-4 P = 20000/((1+0.06)^5) = $14945.06
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