Question 1

Calculate the nominal rate of interest p.a. compounded semi-annually if $5000.00 accumulates to $7002.64 in 78 months.

Accepted Answer

A) 0.8656% 
B) 0.02625% 
C) 2.625% 
D) 0.0525% 
E) 5.25% 
A) 0.8656% 
B) 0.02625% 
C) 2.625% 
D) 0.0525% 
E) 5.25%

Question 2

In how many years will money double at 8% compounded yearly?

Accepted Answer

A) 0.09 years 
B) 0.9 years 
C) 9.01 years 
D) 90.1 years 
E) 2 years 
A) 0.09 years 
B) 0.9 years 
C) 9.01 years 
D) 90.1 years 
E) 2 years

Question 3

Which is the most attractive of the following interest rates offered on a savings account?

Accepted Answer

A) 2.7% compounded annually 
B) 2.68% compounded semiannually 
C) 2.66% compounded quarterly 
D) 2.64% compounded monthly 
E) All of them offer the same effective rate. 
A) 2.7% compounded annually 
B) 2.68% compounded semiannually 
C) 2.66% compounded quarterly 
D) 2.64% compounded monthly 
E) All of them offer the same effective rate.

Question 4

A financial obligation requires payments of $2000.00 today, $2500.00 in three years, and $3000.00 in five years. When can the obligation be discharged by a single payment equal to the sum of the required payments if interest is 6%p.a. compounded monthly?

Accepted Answer

Let the focal date be now; i = @#IMG-DLM& = 0.005;

Question 5

Over a 15-year period, Tariq's investment in Cameco stock grew in value from $3000 to $19 847. During the same period, the consumer price index rose from 88.31 to 118.91. What was his real compound annual rate of interest on the stock during this period?

Accepted Answer

With the CPI up from 88.31 to 118.91, Ta

Question 6

Calculate the nominal annual rate of interest compounded quarterly that is equivalent to 10% p.a. compounded semi-annually.

Accepted Answer

@#IMG-DLM& Programme

Question 7

An 11-year $5000.00 promissory note, with interest at 4.4% compounded monthly, is discounted at 3.5% compounded semi-annually yielding proceeds of $7651.15. How many months before the due date was the date of discount?

Accepted Answer

A) 20 months 
B) 47 months 
C) 116 months 
D) 76 months 
E) 132 months 
A) 20 months 
B) 47 months 
C) 116 months 
D) 76 months 
E) 132 months

Question 8

A 11-year $8000.00 promissory note, with interest at 8.4% compounded monthly, is discounted at 6.5% compounded semi-annually yielding proceeds of $14 631.15. How many months before the due date was the date of discount?

Accepted Answer

Maturity value: PV = 8000.00; i = 0.084

Question 9

At what nominal rate of interest compounded annually will $5000 earn $2500 interest in seven years?

Accepted Answer

PV = 5000, FV = 5000 + 2500 =

Question 10

Deon has $4000.00 invested at 4.5% compounded semi-annually at her bank. In order to make a comparison with another financial institution she needs to know the effective rate of interest at her bank. What is the effective annual rate of interest?

Accepted Answer

A) 1.12% 
B) 2.28% 
C) 9.10% 
D) 4.55% 
E) 4.5% 
A) 1.12% 
B) 2.28% 
C) 9.10% 
D) 4.55% 
E) 4.5%

Question 11

Sajid invested $20 000 in strip bonds earning him $2536.50 in one year. What is the nominal annual rate of interest compounded monthly?

Accepted Answer

A) 12.68% 
B) 2.05% 
C) 4.19% 
D) 12% 
E) 1% 
A) 12.68% 
B) 2.05% 
C) 4.19% 
D) 12% 
E) 1%

Question 12

A five-year, $4500.00 promissory note with interest at 7.5% compounded semi-annually was discounted at 8% compounded quarterly yielding proceeds of $6150.00. How many months before the due date was the discount date?

Accepted Answer

PV = 4500, i = 0.075 ÷ 2 = 0.0

Question 13

At what nominal rate of interest compounded monthly will $40 000.00 earn $7200.00 interest in three years?

Accepted Answer

A) 6% 
B) 0.461% 
C) 4.879% 
D) 59% 
E) 4.61% 
A) 6% 
B) 0.461% 
C) 4.879% 
D) 59% 
E) 4.61%

Question 14

The treasurer of Lynn Lake Credit Union proposes changing the method of compounding interest on premium savings accounts to daily compounding. If the current rate is 4% compounded quarterly, what nominal rate should the treasurer suggest to the Board of Directors to maintain the same effective rate of interest?

Accepted Answer

Invest $1 for one year: @#IMG-DLM& = @#IMG-DLM& i

Question 15

A principal of $5000.00 compounded monthly amounts to $6000.00 in 7 years. What is the nominal annual rate of interest?

Accepted Answer

PV = 5000.00; FV = 6000.00; n

Question 16

Musa's parents deposited $20,000 in a long-term savings account as a wedding expenditure for their grand daughter at her birth, expecting it to triple by the time she gets married. Calculate the number of years for money to triple at 5% p.a. compounded monthly.

Accepted Answer

A) 22 years 
B) 22 years 6 months 
C) 25 years 
D) 30 years 
E) 18 years 7 months 
A) 22 years 
B) 22 years 6 months 
C) 25 years 
D) 30 years 
E) 18 years 7 months

Question 17

If the effective rate of interest on an investment is 6.52%, what is the nominal rate of interest compounded monthly?

Accepted Answer

i = (1+ 0.0652)1/12 - 1
= 1.00

Calculate the nominal rate of interest p.a. compounded semi-annually if $5000.00 accumulates to $7002.64 in 78 months.

In how many years will money double at 8% compounded yearly?

Which is the most attractive of the following interest rates offered on a savings account?

A financial obligation requires payments of $2000.00 today, $2500.00 in three years, and $3000.00 in five years. When can the obligation be discharged by a single payment equal to the sum of the required payments if interest is 6%p.a. compounded monthly?

Over a 15-year period, Tariq's investment in Cameco stock grew in value from $3000 to $19 847. During the same period, the consumer price index rose from 88.31 to 118.91. What was his real compound annual rate of interest on the stock during this period?

Calculate the nominal annual rate of interest compounded quarterly that is equivalent to 10% p.a. compounded semi-annually.

An 11-year $5000.00 promissory note, with interest at 4.4% compounded monthly, is discounted at 3.5% compounded semi-annually yielding proceeds of $7651.15. How many months before the due date was the date of discount?

A 11-year $8000.00 promissory note, with interest at 8.4% compounded monthly, is discounted at 6.5% compounded semi-annually yielding proceeds of $14 631.15. How many months before the due date was the date of discount?

At what nominal rate of interest compounded annually will $5000 earn $2500 interest in seven years?

Deon has $4000.00 invested at 4.5% compounded semi-annually at her bank. In order to make a comparison with another financial institution she needs to know the effective rate of interest at her bank. What is the effective annual rate of interest?

Sajid invested $20 000 in strip bonds earning him $2536.50 in one year. What is the nominal annual rate of interest compounded monthly?

A five-year, $4500.00 promissory note with interest at 7.5% compounded semi-annually was discounted at 8% compounded quarterly yielding proceeds of $6150.00. How many months before the due date was the discount date?

At what nominal rate of interest compounded monthly will $40 000.00 earn $7200.00 interest in three years?

A principal of $5000.00 compounded monthly amounts to $6000.00 in 7 years. What is the nominal annual rate of interest?

Musa's parents deposited $20,000 in a long-term savings account as a wedding expenditure for their grand daughter at her birth, expecting it to triple by the time she gets married. Calculate the number of years for money to triple at 5% p.a. compounded monthly.

If the effective rate of interest on an investment is 6.52%, what is the nominal rate of interest compounded monthly?

Review of Arithmetic

Review of Basic Algebra

Ratio, Proportion, and Percent

Linear Systems

Cost-Volume-Profit Analysis and Break-Even

Trade Discounts, Cash Discounts, Markup, and Markdown

Simple Interest

Simple Interest Applications

Compound Interest - Future Value and Present Value

Ordinary Simple Annuities

Ordinary General Annuities

Annuities Due, Deferred Annuities, and Perpetuities

Amortization of Loans, Residential Mortgages, and Sinking Funds

Bond Valuation

Investment Decision Applications

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Exam 10: Compound Interest - Further Topics

Calculate the nominal rate of interest p.a. compounded semi-annually if $5000.00 accumulates to $7002.64 in 78 months.

In how many years will money double at 8% compounded yearly?

Which is the most attractive of the following interest rates offered on a savings account?

A financial obligation requires payments of $2000.00 today, $2500.00 in three years, and $3000.00 in five years. When can the obligation be discharged by a single payment equal to the sum of the required payments if interest is 6%p.a. compounded monthly?

Over a 15-year period, Tariq's investment in Cameco stock grew in value from $3000 to $19 847. During the same period, the consumer price index rose from 88.31 to 118.91. What was his real compound annual rate of interest on the stock during this period?

Calculate the nominal annual rate of interest compounded quarterly that is equivalent to 10% p.a. compounded semi-annually.

An 11-year $5000.00 promissory note, with interest at 4.4% compounded monthly, is discounted at 3.5% compounded semi-annually yielding proceeds of $7651.15. How many months before the due date was the date of discount?

A 11-year $8000.00 promissory note, with interest at 8.4% compounded monthly, is discounted at 6.5% compounded semi-annually yielding proceeds of $14 631.15. How many months before the due date was the date of discount?

At what nominal rate of interest compounded annually will $5000 earn $2500 interest in seven years?

Deon has $4000.00 invested at 4.5% compounded semi-annually at her bank. In order to make a comparison with another financial institution she needs to know the effective rate of interest at her bank. What is the effective annual rate of interest?

Sajid invested $20 000 in strip bonds earning him $2536.50 in one year. What is the nominal annual rate of interest compounded monthly?

A five-year, $4500.00 promissory note with interest at 7.5% compounded semi-annually was discounted at 8% compounded quarterly yielding proceeds of $6150.00. How many months before the due date was the discount date?

At what nominal rate of interest compounded monthly will $40 000.00 earn $7200.00 interest in three years?

A principal of $5000.00 compounded monthly amounts to $6000.00 in 7 years. What is the nominal annual rate of interest?

Musa's parents deposited $20,000 in a long-term savings account as a wedding expenditure for their grand daughter at her birth, expecting it to triple by the time she gets married. Calculate the number of years for money to triple at 5% p.a. compounded monthly.

If the effective rate of interest on an investment is 6.52%, what is the nominal rate of interest compounded monthly?

Review of Arithmetic

Review of Basic Algebra

Ratio, Proportion, and Percent

Linear Systems

Cost-Volume-Profit Analysis and Break-Even

Trade Discounts, Cash Discounts, Markup, and Markdown

Simple Interest

Simple Interest Applications

Compound Interest - Future Value and Present Value

Ordinary Simple Annuities

Ordinary General Annuities

Annuities Due, Deferred Annuities, and Perpetuities

Amortization of Loans, Residential Mortgages, and Sinking Funds

Bond Valuation

Investment Decision Applications

Filters