1. Assume one year of college costs $38,000 today. If these costs increase at an

Question

1. Assume one year of college costs $38,000 today. If these costs increase at an annual rate of 6.9 percent, what will one year of college cost 20 years from now?

2. Two years ago, a certain wooded area contained 100 groundhogs. If the population of these animals increase at an annual rate of 120 percent, approximately how many groundhogs are in the wooded area today?

3. Assume you want to borrow $5,000 for 5 years and repay the entire amount with interest at the end of the loan term. Which one of the following interest rates would you prefer?

a. 5 percent simple interest

b. 5 percent interest compounded annually

c. 7 percent simple interest

d. 7 percent interest compounded annually

Explanation / Answer

1.one year of college cost 20 years from now= 38000*1.069^20 = $144323.72

2.groundhogs in the wooded area today = 100*2.2^2 = 484

3.a. 5 percent simple interest

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