Exam 8: Compound Interest: Future Value and Present Value

A $10,000 eight-year investment earns interest at 12% compounded semi-annually. If it is sold 30 months before maturity to yield 16% compounded quarterly, what is its selling price?

What single payment 6 months from now would be equivalent to payments of $500 due (but not paid) 4 months ago, and $800 due in 12 months? Assume money can earn 7.5% compounded monthly.

Judy invested $8,500 in a three-year compound-interest GIC earning 6% compounded monthly. What is the GIC's maturity value?

If the total interest earned on an investment at 8.2% compounded semi-annually for 8½ years was $1,175.98, what was the original investment?

Calculate the missing value:

Maria invested $1,200 at 3.25% compounded monthly. After six months, the rate changed to 3.5% compounded quarterly. How much interest will Maria earn after four years?

A 30-year, $1,000 strip bond was issued by Sun Oil Company at a yield rate of 8.8% compounded semi-annually. How much money did Sun Oil borrow by issuing this bond?

A 25-year, $10,000 strip bond was first issued at 6% compounded semi-annually. Nine years before maturity it was sold on the bond market at a price that would provide the purchaser with a yield rate of 6.8% compounded semi-annually. What was the selling price at that time?

Laurel borrowed some money from Hardy 42 months ago. The loan principal plus interest at 17% compounded annually is to be repaid today. Laurel and Hardy agree that the total amount due is $31,618. How much did Laurel borrow from Hardy 42 months ago?

A loan of $5,000 is to be repaid by $2,500 in one year, and a final payment in two years. If interest is 6.6% compounded quarterly, what is the size of the final payment?

A $6,000 loan at 6% compounded quarterly is to be settled by two payments. The first payment is due after 9 months and the second payment, half the amount of the first payment, is due after 1½ years. Determine the size of each payment.

Maria has just received an inheritance of $89,218 and she is going to invest the money today at 10.5% compounded monthly. This money must provide her with $75,000 in eight years and $100,000 in twelve years. If the $89,218 isn't enough, she will add to the investment now from her other savings. If the $89,218 is more than enough she will spend the extra money. Which of the following statements is true?

Calculate the combined equivalent value of the scheduled payments on the indicated dates. The rate of return that money can earn is given in the fourth column. Assume that payments due in the past have not yet been made.

Marvin has a five-year GIC which has a maturity value of $88,206.38. The GIC is accumulating at 6.2% compounded semi-annually. What is the principal of the GIC?

A loan of $4,000 at 7.5% compounded monthly requires three payments of $1,000 at 6, 12, and 18 months after the date of the loan and a final payment of the full balance after 2 years. What is the amount of the final payment?

Everyone thought he was being foolish again when, 65 years ago, great-great-uncle Crazy Louie invested $150 in the common stock of a company that produced a carbonated soft drink in Atlanta Georgia. The value of the stock has grown at an average rate of 15% compounded semi-annually. What's the value of Crazy Louie's foolish investment now?

Calculate the periodic interest rate for 3.8% compounded quarterly.

On February 1, 2004, Selma purchased a $50,000 compound-interest CSB. The interest rate on the CSB was 1.55% for each of the first two years and 2.675% for the third year. What was the total interest earned on the CSB by the time Selma redeemed the bond on April 1, 2006? (Taken from CIFP course materials.)

Lori-Anne invests $2,500 over a two-and-a-half-year period at 5% compounded quarterly. Thereafter, the interest rate changes to 6% compounded monthly. Determine the value of the investment two years after the interest rate change.

Assume money can earn 15% compounded semi-annually. Rank the following payments in order of the payee's first choice, second choice, and third choice, respectively: 10,000 paid today, $20,000 to be paid five years from today, or $13,500,000 to be paid fifty years from today.