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IB Maths AA SL 1.4 Financial Applications

IB Maths AA SL 1.4 Financial Applications
IB Mathematics: analysis and approaches guide, first assessment 2021

Practise modelling compound interest, inflation and depreciation with the correct compounding interval, then solving for future value, real value or a time threshold.

How this is tested

  • match the percentage rate and number of periods before applying compound growth or depreciation
  • separate nominal balance, interest earned and inflation-adjusted real value with correct rounding
  • solve an exponential inequality and choose the first whole period at which the target is exceeded

Question 7

[Maximum number: 3]

Andy and Jess each have $ 5000.
Andy invests the money in a new savings plan that will pay interest at the end of each month.
Andy will receive a fixed amount of interest each month. The amount received is 0.315 % of the initial investment.

In this part, where appropriate, give all answers to the nearest dollar.
Jess invests her $5000 in a new account that pays 3\% interest compounded annually.

Question 7(a)(i)

(a)

Determine the amount of interest Andy will receive at the end of each month. Give this answer correct to two decimal places.

Question 7(a)(ii)

(b)

Hence, determine the amount of interest Andy will receive each year.

Question 7(b)(i)

(c)

Determine the amount of money that will be in Jess's account at the end of 5 years.

Question 7(b)(ii)

(d)

Hence, find the amount of interest Jess will receive in the 5 years.

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