Finite Mathematics : Mathematics of Finance

Study concepts, example questions & explanations for Finite Mathematics

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Example Questions

Example Question #1 : Mathematics Of Finance

What is the total interest made after 4 years on a simple interest loan that accumulates 13% each year and has original amount was $1350.

Possible Answers:

Correct answer:

Explanation:

To solve this problem, first recall the formula to calculate simple interest.

where

From the question it's known that,

Thus the equation becomes,

Therefore $702 in interested accumulated after four years.

Example Question #2 : Mathematics Of Finance

Money is deposited in a bank account at 7% interest per year, compounded bimonthly. If no money is deposited into or withdrawn from the account, then how long will it take for the money to double?

Possible Answers:

9 years 8 months

10 years 2 months

9 years 10 months

9 years 6 months

10 years 0 months

Correct answer:

10 years 0 months

Explanation:

If is deposited in a bank account with interest rate ( converted to a decimal) compounded times a year for years, then the final balance of the account is

Dividing both sides of the formula by , this is

The money doubles, so substitute 2 for . Also, set and (bimonthly), and calculate as follows:

, so this is 9 years and 11.52 months; rounding up to the next bimonth, this is 10 years even.

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