Exam 10: Annuities: Future Value and Present Value

Dr. Krawchuk made deposits of $2,000 to his RRSP at the end of each calendar quarter for 6 years. He then left general practice for specialist training and did not make further contributions for 2½ years. What amount was in his RRSP at the end of this period if the plan earned 5% compounded quarterly over the entire 8½ years?

Suppose Evan contributes $2,000 to his RRSP at the end of every quarter for the next 15 years and then contributes $1,000 at each month's end for the subsequent 10 years. How much will he have in his RRSP at the end of the 25 years? Assume that the RRSP earns 6% compounded semi-annually.

Determine the future value of $5,000 per month deposits for the first four years, and $8,000 per quarter for the remaining three years, given an interest rate of 6.5% compounded semi-annually.

A savings plan requires end-of-month contributions of $100 for 25 years. What will be the future value of the plan if it earns 7% compounded quarterly for the first half of the annuity's term and 8% compounded semi-annually for the last half of the term?

What amount of money will Kevin need to have in 20 years when he retires? His goal is to purchase an ordinary annuity that pays $1,000 per month for 30 years after he retires? Assume that after he retires the interest rate will be 7.2% compounded monthly.

What percentage more funds will you have in your RRSP 20 years from now by making fixed contributions of $3,000 at the end of every six months for the next 20 years, instead of waiting 10 years and making semi-annual contributions that are twice as large for half as many years? Assume that the RRSP earns 8% compounded semi-annually.

Calculate the equivalent periodic interest rate per payment interval for the following annuity: Monthly payments discounted at 8.4% compounded semi-annually.

J. Spaulding Wilson's mortgage loan will require payments of $1,132 at the end of every month for six years and at that time his loan balance outstanding will be $133,040. The interest rate is 6.2% compounded semi-annually. How much did J. Spaulding Wilson borrow?

Your client plans to invest $2,000 at the end of each year. The rate of return on the investment is 7.5% compounded annually. What will be the value of the investment at the end of 12 years? (Taken from CIFP course materials.)

Dario invested a lump sum of $20,000 and began to invest $75 per quarter for 5 years. If interest is 7% compounded monthly, determine the total amount of interest earned over a 5 year period.

Liam is investing $2,000 per year into his RRSP for five years at 3.5% compounded annually. Then he will add $1,500 every six months for the next five years at 3.75% compounded semi-annually. How much will Liam have in his account in total after 10 years?

Larissa plans to deposit $1,500 per year into a savings account paying 4.75% yearly for 10 years. She will leave the accumulated amount in the account for another 10 years at 5.25% compounded semi-annually. How much will Larissa have in the account after 20 years?

Calculate the periodic interest rate that matches the payment interval for each annuity (to the nearest 0.001%):

Calculate the periodic interest rate that matches the payment interval for each annuity (to the nearest 0.001%):

Marika is paying $325 per month for a car over four years. If interest is 3.8% compounded monthly, what was the purchase price of the car? How much interest will Marika pay overall?

For its "No Interest for One Year Sale," Flemming's Furniture advertises that customers pay only a 10% down payment. The balance may be paid by 12 equal monthly payments with no interest charges. Flemming's has an operating loan on which it pays interest at 8.4% compounded monthly. If Flemming's sells furniture in a cash transaction rather than on the 10%-down-and-no-interest promotion, Flemming's can use the extra cash proceeds to reduce the balance on its loan, and thereby save on interest costs. What percentage discount for cash could Flemming's give and still be no worse off than receiving full price under the terms of the sale?

What is the future value of deposits of $1,000 per year for 10 years earning 5.75% compounded annually?

Peter makes a $25,000 lump sum amount in an account earning 4.5% compounded quarterly. He plans to withdraw $250 per month over three years. Determine the future value of the account at the end of this period.

Determine the present value of the ordinary annuity:

What is the present value of end-of-quarter payments of $2,500 for seven years? Use a discount rate of 6% compounded quarterly.