Financial Maths [46 marks]
1. [Maximum mark: 6] SPM.2.SL.TZ0.3
On 1st January 2020, Laurie invests $P in an account that pays a nominal annual
interest rate of 5.5 %, compounded quarterly.
The amount of money in Laurie’s account at the end of each year follows a
geometric sequence with common ratio, r.
(a) Find the value of r, giving your answer to four significant figures. [3]
(b) Laurie makes no further deposits to or withdrawals from the
account.
Find the year in which the amount of money in Laurie’s account will
become double the amount she invested. [3]
2. [Maximum mark: 12] EXN.2.SL.TZ0.7
Helen and Jane both commence new jobs each starting on an annual salary of
$70, 000 . At the start of each new year, Helen receives an annual salary increase
of $2400.
Let $H represent Helen’s annual salary at the start of her nth year of
n
employment.
At the start of each new year, Jane receives an annual salary increase of 3% of
her previous year’s annual salary.
Jane’s annual salary, $J , at the start of her nth year of employment is given by
n
.
n−1
J n = 70 000(1. 03)
At the start of year N , Jane’s annual salary exceeds Helen’s annual salary for
the first time.
(a) Show that H n = 2400n + 67 600 . [2]
(b) Given that J follows a geometric sequence, state the value of the
n
common ratio, r. [1]
(c.i) Find the value of N . [3]
(c.ii) For the value of N found in part (c) (i), state Helen’s annual salary
and Jane’s annual salary, correct to the nearest dollar. [2]
(d) Find Jane’s total earnings at the start of her 10th year of
employment. Give your answer correct to the nearest dollar. [4]
3. [Maximum mark: 16] 21M.2.SL.TZ1.7
Two friends Amelia and Bill, each set themselves a target of saving $20 000 .
They each have $9000 to invest.
Amelia invests her $9000 in an account that offers an interest rate of 7% per
annum compounded annually.
A third friend Chris also wants to reach the $20 000 target. He puts his money in
a safe where he does not earn any interest. His system is to add more money to
this safe each year. Each year he will add half the amount added in the previous
year.
(a.i) Find the value of Amelia’s investment after 5 years to the nearest
hundred dollars. [3]
(a.ii) Determine the number of years required for Amelia’s investment to
reach the target. [2]
(b) Bill invests his $9000 in an account that offers an interest rate of r%
per annum compounded monthly, where r is set to two decimal
places.
Find the minimum value of r needed for Bill to reach the target after
10 years. [3]
(c.i) Show that Chris will never reach the target if his initial deposit is
$9000 . [5]
(c.ii) Find the amount Chris needs to deposit initially in order to reach the
target after 5 years. Give your answer to the nearest dollar. [3]
4. [Maximum mark: 6] 17M.1.SL.TZ2.T_14
Jashanti is saving money to buy a car. The price of the car, in US Dollars (USD),
can be modelled by the equation
t
P = 8500 (0.95) .
Jashanti’s savings, in USD, can be modelled by the equation
S = 400t + 2000.
In both equations t is the time in months since Jashanti started saving for the car.
Jashanti does not want to wait too long and wants to buy the car two months
after she started saving. She decides to ask her parents for the extra money that
she needs.
(a) Write down the amount of money Jashanti saves per month. [1]
(b) Use your graphic display calculator to find how long it will take for
Jashanti to have saved enough money to buy the car. [2]
(c) Calculate how much extra money Jashanti needs. [3]
5. [Maximum mark: 6] 22M.2.SL.TZ1.1
In this question, give all answers correct to two decimal places.
Sam invests $1700 in a savings account that pays a nominal annual rate of
interest of 2. 74%, compounded half-yearly. Sam makes no further payments to,
or withdrawals from, this account.
David also invests $1700 in a savings account that pays an annual rate of
interest of r%, compounded yearly. David makes no further payments or
withdrawals from this account.
(a) Find the amount that Sam will have in his account after 10 years. [3]
(b) Find the value of r required so that the amount in David’s account
after 10 years will be equal to the amount in Sam’s account. [2]
(c) Find the interest David will earn over the 10 years. [1]
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