The Mathematics of Money

32. In 2005 it was estimated that there were 100 million Internet users in China. If this number grows at an annual rate of
    8% for the next 5 years, how many internet users will China have in 2010?


33. Over the course of the twentieth century, the infl ation rate in the United States averaged somewhere between 3 and 4%
    (depending on how the rate is calculated). Suppose that for the next 50 years the rate of infl ation runs at 3^1 ⁄ 2 %, and that
    candy prices rise at this same rate. How much will a candy bar that now costs 59¢ cost 50 years from now?

G. Grab Bag

34. Find the effective interest rate equivalent to 4.92% compounded daily.


35. Would you be better off with an investment that pays 6.55% compounded daily or one that pays 6.68% compounded
    quarterly? Justify your answer.


36. Vince has just opened an 18-month certifi cate of deposit on which interest compounds daily. He deposited $4,635 and
    the effective rate of interest is 4.73%. How much total interest will he earn?


37. According to a mutual fund company, their Core Equity mutual fund has on average grown at an effective rate of
    10.75%. If you invest $10,000 in this fund, and it grows at this claimed rate for the next 10 years, what will your
    account be worth?


38. In 2005, total U.S. petroleum demand was estimated to be 21.5 million barrels per day, and was projected to grow at
    a 2% effective rate in the future. Assuming these fi gures are correct, what will the daily demand be in 2020?


39. Jacinda invested $1,250 in an account that pays 5% compounded quarterly. Would she have been better off with an
    account that pays 4.93% compounded daily? Justify your answer.


40. Holland and Wales Federal Credit Union states that it is offering an interest rate of 11.99% compounded daily for
    personal loans. What is the effective rate?


41. Which of these fi nancial institutions is offering the best rate for a 3-year CD?

Bank Rate

Duke Center Trust

Bradford Financial

Knapp Creek National Bank

5.33% compounded daily

5.51% compounded annually

5.45% compounded quarterly

42. Interest on my 2-year certifi cate of deposit compounds quarterly. The APY is 7.11%. If I originally deposited $5,432.10,
    fi nd this CD’s maturity value.

126 Chapter 3 Compound Interest