Exam 8: Compound Interest: Future Value and Present Value

Taylor deposits $3,500 at the end of year 1, $4,000 at the end of year 3 and $2,500 at the end of year 5. If interest is 6.2% compounded monthly, determine the value at the end of year 7.

Jack invested $10,000 at 10% compounded annually for 35 years. Jill also invested $10,000 for 35 years but her interest rate was 11% compounded annually. How much MORE interest did Jill earn as compared to Jack?

Given a periodic interest rate of 0.9375%, calculate the nominal interest rate if interest is compounded quarterly.

The BMO Bank of Montreal advertised rates of 1.8%, 2.25%, 2.6%, 3%, and 3.25% for the five successive years of its five-year compound-interest Rate Optimizer GIC. At the same time, the bank was offering fixed-rate five-year compound-interest GICs yielding 2.75% compounded annually. What total interest would be earned during the five-year term on a $5,000 investment in each type of GIC?

In 2005 the number of workers in the forest industry was forecast to decline by 3% per year, reaching 80,000 in 2015. How many were employed in the industry in 2005?

Twenty years ago Freddie invested $2,000. For the first 10 years he earned 13% compounded semi-annually. For the next 10 years he earned 8% compounded quarterly. What was the value of the investment now, at the end of the 20 years?

Ross has just been notified that the combined principal and interest on an amount that he borrowed 27 months ago at 11% compounded quarterly is now $2297.78. How much of this amount is principal and how much is interest?

A $1000.00 face value Series 114 compound interest CSB was redeemed on August 8, 2013. What was its redemption value?

An $18,000 obligation is to be repaid by two payments. The first payment is six months from now, while the second is 18 months from now. In addition, the second payment will be half the amount of the first. Interest is 5.15% compounded semi-annually. Using the financial functions on the calculator, determine the size of each payment.

A $6,500 loan at 11.25% compounded monthly is to be repaid by three equal payments due 3, 6, and 12 months after the date of the loan. Calculate the size of each payment.

A trust company offers 3-year compound-interest GICs earning 4.8% compounded monthly or 4.9% compounded semi-annually. Which rate should an investor choose?

A $1,000 face value compound-interest series S114 Canada Savings Bond was redeemed on March 8, 2013. What amount did the bond's owner receive? (Obtain the issue date and the interest rates paid on the bond from Table 8.2)

Mateo deposits $5,000 at the end of years 2, 4 and 6. If interest is 8.2% compounded annually, determine the value at the end of year 6.

How much more will an investment of $10,000 earning 8% compounded annually be worth after 15 years than after 10 years? Calculate the difference in dollars and as a percentage of the smaller maturity value.

What would be the most convincing way to demonstrate that the replacement stream in Example 8.6A is economically equivalent to the given stream?

By calculating the maturity value of $100 invested for 1 year at each rate, determine which rate of return an investor would prefer. a) 12.0% compounded monthly. b) 12.1% compounded quarterly. c) 12.2% compounded semi-annually. d) 12.3% compounded annually.

If an investment doubles in nine years, how long will it take to quadruple (at the same rate of return)? (This problem does not require any detailed calculations.)

The scheduled payment stream consists of $5,000 due today and $10,000 due in five years. It is proposed to replace this stream by an economically equivalent stream comprised of three equal payments due one, three, and five years from now. Determine the size of each payment if money is worth 5% compounded annually.

Interest is 3.75% compounded monthly. If you want to have $4,000 in an account in three years, how much should you deposit to that account today?

Doris is retiring today and she plans to buy a new car for $25,000 seven years from now and a second new car for $40,000 seventeen years from now. How much "new car money" should she set aside now if she can expect to earn 8½% compounded annually on her savings?