Compound Interest Problems
1. A principal of $2000 is placed in a savings account at 3% per annum compounded annually.
How much is in the account after one year, two years and three years?
2. What would $1000 become in a saving account at 3% per year for 3 years when the interest
is not compounded (simple interest)? What would the same amount become after 3 years
with the same rate but compounded annually?
3. $100 is the principal deposited in a 5% saving account not compounded (simple interest). The
same amount of $100 is placed in a 5% saving account compounded annually. Find the total
amount A after t years in each saving plan and graph both of them in the same system of
rectangular axes. Use the graphs to approximate the time it takes each saving plan to double
the initial amount.
4. If $3000 is placed in an account at 5% and is compounded quarterly for 5 years. How much is
in the account at the end of 5 years?
5. $1200 is placed in an account at 4% compounded annually for 2 years. It is then withdrawn at
the end of the two years and placed in another bank at the rate of 5% compounded annually
for 4 years. What is the balance in the second account after the 4 years.
6. $1,200 is placed in an account at 4% compounded daily for 2 years. It is then withdrawn and
placed in another bank at the rate of 5% compounded daily for 4 years. What is the balance in
the second account after the 4 years. (compare with the previous problem)
7. $1200 is placed in an account at 4% compounded continuously for 2 years. It is then
withdrawn and placed in another bank at the rate of 5% compounded continuously for 4
years. What is the balance in the second account after the 4 years. (compare with the two
previous problem)
8. What principal you have to deposit in a 4.5% saving account compounded monthly in order to
have a total of $10,000 after 8 years?
9. A principal of $120 is deposited in a 7% account and compounded continuously. At the same
time a principal of $150 is deposited in a 5% account and compounded annually. How long
does it take for the amounts in the two accounts to be equal?
10. A first saving account pays 5% compounded annually. A second saving account pays 5%
compounded continuously. Which of the two investments is better in the long term?
11. What interest rate, compounded annually, is needed for a principal of $4,000 to increase to
$4,500 in 10 year?
12. A person deposited $1,000 in a 2% account compounded continuously. In a second account,
he deposited $500 in a 8% account compounded continuously. When will the total amounts in
both accounts be equal? When will the total amount in the second accounts be 50% more
than the total amount in the second account?
13. A bank saving account offers 4% compounded on a quarterly basis. A customer deposit $200,
in this type of account, at the start of each quarter starting with the first deposit on the first of
January and the fourth deposit on the first of October. What is the total amount in his account
at the end of the year?
14. An amount of $1,500 is invested for 5 years at the rates of 2% for the first two years, 5% for
the third year and 6% for the fourth and fifth years all compounded continuously. What is the
total amount at the end of the 5 years?
