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Exam Lessons Mathematics

Arithmetic of Finance: Simple and Compound Interest

Arithmetic of Finance:

  • Simple Interest
  • Compound Interest
  • Annuities, Depreciation and Amortization

Evaluation:

  1. A television set costing #25000 depreciates by 15% in the first year and by 25% in the second year. Find its value after 2 years.
  2. How long will it take for prices to double if the rate of inflation is 25% per annum?

General Evaluation

  1. Using logarithm tables, find the compound interest on #20000 for 4 years at 12% per annum.
  2. Calculate the amount of an annuity of #20000 payable yearly for 5 years at 12% per annum.

Reading Assignment: NGM for SS 3 Chapter 5 page 35 – 42

Weekend Assignment

  1. Calculate the amount if simple interest is paid yearly at 15% per annum for 4 years on a principal of #550000
  2. Calculate the compound interest on #18000 for 10 years at 9.5% per annum.
  3. Find the amount created by an annuity of #60000 payable yearly for 4 years at 4% interest.
  4. A woman insures her life for #3million by paying a premium of #2000 at the beginning of each year for 20 years. After 20 years the insurance company ends the agreement and gives her a lump sum payment of #50000. Assume compound interest at 8% per annum.
  5. Calculate the actual value of the premiums paid.
  6. Find the profit made by the company.
  7. Which piece of numerical information is not needed in this problem?

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