Question 1

At what nominal rate of interest compounded semi-annually will $5900 earn $6400 interest in six years?

Accepted Answer

PV = 5900, FV = 5900+ 6400 = 12300, n = 6×2 = 12
i =   -1 =
= (2.0847458)1/12 - 1 =
= 1.0631334 - 1 = 0.0631334
The nominal annual rate is 0.0631334×2 ×100%=12.63%.

Question 2

The accountant of Crystal Credit Union proposes changing the method of compounding interest on premium savings accounts to yearly compounding. If the current rate is 8% compounded quarterly, what nominal rate should the treasurer suggest to the Board of Directors to maintain the same effective rate of interest?

Free

(Essay)

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Question 2

Correct Answer:

Verified

Invest $1 for one year : = i = (1.02)4- 1
= 1.08243216 - 1
= 0.08243216 = 8.24% compounded yearly

Accepted Answer

Invest $1 for one year :   =   i = (1.02)4- 1
= 1.08243216 - 1
= 0.08243216 = 8.24% compounded yearly

Question 3

Calculate the nominal rate of interest compounded semi-annually that is equivalent to 8.4% compounded monthly.

Accepted Answer

For monthly; i =   = 0.007; n = 12
For semi-annually; n = 2   =   1 + i =   1 + i = 1.042741896
i = 0.042741896 = 4.2741%(2) = 8.55%
Programmed solution:

Question 4

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
= 1.005

Question 5

In how many years will money double at 6.62% compounded semi-annually?

Accepted Answer

PV = 1, FV = 2, i =

Question 6

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 7

What is the monthly discount rate expressed as an nominal annual rate for a future value of $182500 to be reduced to $178,663.58 over a period of 4.25 years?

Accepted Answer

A)  4.06% 
B)  8.04% 
C)  6.88% 
D)  4.88% 
E)  0.50% 
A)  4.06% 
B)  8.04% 
C)  6.88% 
D)  4.88% 
E)  0.50%

Question 8

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

Accepted Answer

PV = 5000, FV = 5000 + 2500 =

Question 9

A financial obligation requires the payment of $250.00 in eighteen months, $350.00 in thirty months, and $300.00 in fifty-four months. When can the obligation be discharged by a single payment of $800.00 if interest is 5% compounded semi-annually?

Accepted Answer

Let the focal date be now; i = 0.05÷2 =

Question 10

A financial obligation requires the payment of $1000.00 in nine months, and $500.00 in twelve months. When can the obligation be discharged by a single payment of $1700.00 if interest is 12% compounded quarterly?

Accepted Answer

Let the focal date be now; i = 0.12÷4 =

Question 11

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 12

In how many years will money triple at 12% compounded semi-annually?

Accepted Answer

PV = 1, FV = 3, i =

Question 13

A principal of $4250.00 compounded monthly amounts to $4800.00 in 6.25 years. What is the nominal annual rate of interest?

Accepted Answer

PV = 4250.00; FV = 4800.00; n

Question 14

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 15

Calculate the nominal rate of interest compounded semi-annually that will double money in eight years.

Accepted Answer

PV = 1; FV = 2; n = 8(2) = 16;

Question 16

Calculate the effective annual rate for 10% p.a. compounded quarterly.

Accepted Answer

A)  0.1038% 
B)  1.038% 
C)  10.38% 
D)  10% 
E)  2.5% 
A)  0.1038% 
B)  1.038% 
C)  10.38% 
D)  10% 
E)  2.5%

Question 17

A financial obligation requires the payment of $1500.00 in nine months, $700.00 in twenty-one months, and $1700.00 in 33 months. When can the obligation be discharged by a single payment of $3900.00 if interest is 8.44% compounded quarterly?

Accepted Answer

Let the focal date be now; i = 0.0844÷4

Question 18

What is the nominal rate of interest compounded semi-annually that is equivalent to an effective rate of 8.25%

Accepted Answer

i = (1+0.0825)0.5 - 1 = 1.0404

Question 19

Determine the effective rate of interest corresponding to 6% p.a. compounded monthly

Accepted Answer

i = @#IMG-DLM& = 0.5% = 0.005; m = 12
f

Question 20

In how many days will $770.00 grow to $880.00 at 11.5% p.a. compounded monthly?

Accepted Answer

PV = 770, FV = 880, i=0.115÷12

At what nominal rate of interest compounded semi-annually will $5900 earn $6400 interest in six years?

Calculate the nominal rate of interest compounded semi-annually that is equivalent to 8.4% compounded monthly.

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

In how many years will money double at 6.62% compounded semi-annually?

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?

What is the monthly discount rate expressed as an nominal annual rate for a future value of $182500 to be reduced to $178,663.58 over a period of 4.25 years?

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

A financial obligation requires the payment of $250.00 in eighteen months, $350.00 in thirty months, and $300.00 in fifty-four months. When can the obligation be discharged by a single payment of $800.00 if interest is 5% compounded semi-annually?

A financial obligation requires the payment of $1000.00 in nine months, and $500.00 in twelve months. When can the obligation be discharged by a single payment of $1700.00 if interest is 12% compounded quarterly?

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 triple at 12% compounded semi-annually?

A principal of $4250.00 compounded monthly amounts to $4800.00 in 6.25 years. What is the nominal annual rate of interest?

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

Calculate the nominal rate of interest compounded semi-annually that will double money in eight years.

Calculate the effective annual rate for 10% p.a. compounded quarterly.

A financial obligation requires the payment of $1500.00 in nine months, $700.00 in twenty-one months, and $1700.00 in 33 months. When can the obligation be discharged by a single payment of $3900.00 if interest is 8.44% compounded quarterly?

What is the nominal rate of interest compounded semi-annually that is equivalent to an effective rate of 8.25%

Determine the effective rate of interest corresponding to 6% p.a. compounded monthly

In how many days will $770.00 grow to $880.00 at 11.5% p.a. compounded monthly?

Review of Arithmetic

Review of Basic Algebra

Ratio, Proportion, and Percent

Linear Systems

Trade Discount, Cash Discount, Markup, and Markdown

Break-Even and Cost-Volume-Profit Analysis

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, Including Residential Mortgages

Bond Valuation and Sinking Funds

Investment Decision Applications

Filters

Exam 10: Compound Interest - Further Topics

At what nominal rate of interest compounded semi-annually will $5900 earn $6400 interest in six years?

Calculate the nominal rate of interest compounded semi-annually that is equivalent to 8.4% compounded monthly.

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

In how many years will money double at 6.62% compounded semi-annually?

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?

What is the monthly discount rate expressed as an nominal annual rate for a future value of $182500 to be reduced to $178,663.58 over a period of 4.25 years?

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

A financial obligation requires the payment of $250.00 in eighteen months, $350.00 in thirty months, and $300.00 in fifty-four months. When can the obligation be discharged by a single payment of $800.00 if interest is 5% compounded semi-annually?

A financial obligation requires the payment of $1000.00 in nine months, and $500.00 in twelve months. When can the obligation be discharged by a single payment of $1700.00 if interest is 12% compounded quarterly?

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 triple at 12% compounded semi-annually?

A principal of $4250.00 compounded monthly amounts to $4800.00 in 6.25 years. What is the nominal annual rate of interest?

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

Calculate the nominal rate of interest compounded semi-annually that will double money in eight years.

Calculate the effective annual rate for 10% p.a. compounded quarterly.

A financial obligation requires the payment of $1500.00 in nine months, $700.00 in twenty-one months, and $1700.00 in 33 months. When can the obligation be discharged by a single payment of $3900.00 if interest is 8.44% compounded quarterly?

What is the nominal rate of interest compounded semi-annually that is equivalent to an effective rate of 8.25%

Determine the effective rate of interest corresponding to 6% p.a. compounded monthly

In how many days will $770.00 grow to $880.00 at 11.5% p.a. compounded monthly?

Review of Arithmetic

Review of Basic Algebra

Ratio, Proportion, and Percent

Linear Systems

Trade Discount, Cash Discount, Markup, and Markdown

Break-Even and Cost-Volume-Profit Analysis

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, Including Residential Mortgages

Bond Valuation and Sinking Funds

Investment Decision Applications

Filters