Question 1

Which situation is best modelled by compound depreciation?

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Question 2

In the IB compound-interest formula, what value of k is used for monthly compounding?

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Question 3

Two accounts both advertise 6% per year. One compounds yearly and one monthly. Which usually gives the larger final value?

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Question 4

A savings account grows by 7% per year. Which model is correct for an initial amount P after n years?

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Question 5

A house price rises by 6% per year from $300 000. Find the value after 4 years.

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Question 6

What value of k is used for quarterly compounding?

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Question 7

A nominal rate of 12% compounded monthly gives what monthly rate?

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Question 8

In FV = PV(1 + r/(100k))^(kn), what does kn represent?

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Question 9

Find the value of $3000 invested at 6% per year for 2 years, compounded monthly.

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Question 10

Find the value of $4500 invested at 5% per year for 3 years, compounded quarterly.

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Question 11

A value grows by 5% per year for 3 years from $2000. Which expression should be used?

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Question 12

Why is PV often negative in TVM questions?

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Question 13

For 4 years compounded monthly, what should N be?

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Question 14

Two options give final values of $5412 and $5438. Which is better for a saver who wants the larger balance?

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Question 15

A question asks which investment is better for the largest balance after 5 years. What should be compared?

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Question 16

If a question asks “how long will it take?”, which TVM variable is usually unknown?

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Question 17

Why is “Option B is better” weaker than “Option B is better because it gives the larger final balance”?

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Question 18

In TVM, what does N represent?

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Question 19

A phone loses 18% of its value each year. What is the yearly multiplier?

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Question 20

In FV = PV × (1 + r/(100k))^(kn), how should r = 5% be entered?

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Topic 1.4: Compound Interest and Depreciation Questions

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