Question 1

Calculate the periodic payment for the following ordinary annuity.

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Question 2

Susan's car loan payments are $265.08 at the end of each month for four years. The amount she borrowed was $12,000. What is the monthly compounded nominal interest rate?

Accepted Answer

A)  6.500% 
B)  2.900% 
C)  10.500% 
D)  4.750% 
E)  6.000%

Question 3

Brian has a mortgage of 150,000 on which he is making monthly payments of $1,200 for 20 years. What rate of interest compounded quarterly is Brian paying?

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Question 4

If regular month-end deposits of $200 in a savings account amounted to $7,727.62 after three years, what monthly compounded nominal rate and effective rate of interest were paid on the account?

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Question 5

If $100,000 will purchase a 20-year annuity paying $739 at each month's end, what monthly compounded nominal rate and effective rate of interest are earned by the funds?

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Question 6

Calculate the nominal and effective rate of interest for the following ordinary annuity. Determine the nominal interest rate whose compounding interval equals the payment interval.

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Question 7

$2,000 will be contributed to an RRSP at the end of every six months for 20 years. What effective rate of return must the funds in the plan earn if it is to be worth $250,000 at the end of the 20 years?

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Question 8

Farah has $600,000 in her RRSP and wishes to retire. She is considering using the funds to purchase an annuity that earns 5% compounded annually and pays her $3500 at the end of each month. If she buys the annuity, for how long will she receive payments?

Accepted Answer

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Question 9

Marion is receiving payments of $500 per month for 20 years. In order to receive these payments, she deposited $90,000 in to an account with monthly compounding. What rate of interest did the account pay?

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Question 10

Fred must pay a $25,000 obligation one year from now. What end-of-month payments for twelve months would put the creditor in an equivalent financial position if the creditor can earn 9% compounded monthly?

Accepted Answer

A)  $2,186.29 
B)  $1,863.67 
C)  $1,998.79 
D)  $2,170.01 
E)  $1,983.91

Question 11

Calculate the term, expressed in years and months, of the following ordinary annuity.

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Question 12

Rentown advertised a computer system at a cash price of $1699 and at a rent-to-own rate of $129 at the beginning of each month for 24 months. What effective rate of interest is a customer paying to acquire the computer in a rent-to-own transaction?

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Question 13

Determine the present value of $450 quarterly payments made at the start of each quarter for 7 years, assuming a rate of interest of 6.5% compounded monthly.

Accepted Answer

A)  $11,542.57 
B)  $10,211.02 
C)  $9,875.46 
D)  $9,440.38 
E)  $9,009.44

Question 14

Heather is planning to invest a constant amount of money at the end of every year for 15 years and then allow her money to accumulate interest for 15 more years without any additional deposits. If her investments earn 11% compounded annually and she must have $650,000 in 30 years, how much will she invest at the end of each of the next 15 years?

Accepted Answer

A)  $3,266 
B)  $2,167 
C)  $1,889 
D)  $3,612 
E)  $3,949

Question 15

Five years before her daughter was expected to enter college, Frieda deposited $15,000 in an education fund. Her daughter will make 48 equal quarterly withdrawals from the fund starting on the date she enters college. If the education fund earns 10% compounded quarterly, what will be the maximum quarterly withdrawal?

Accepted Answer

A)  $863.41 
B)  $540.09 
C)  $526.92 
D)  $263.92 
E)  $885.00

Question 16

Susan bought a car for $25,000 and is making monthly payments at 7.25% compounded quarterly over four years. At the end of four years, Susan will owe $8,000. What is the amount of Susan's monthly payment?

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Question 17

How much longer will it take month-end RRSP contributions of $500 to accumulate $500,000 than month-end contributions of $550? Assume that the RRSP earns 3.75% compounded monthly. Round the time required in each case to the next higher month.

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Question 18

What effective interest rate will Frankie have to earn if his investments of $2,000 at the end of every three months for 20 years are to have a maturity value in 20 years of $1,000,000?

Accepted Answer

A)  11.56% 
B)  13.81% 
C)  15.29% 
D)  16.19% 
E)  17.49%

Question 19

Marvin's goal is to accumulate $1,000,000 in his retirement plan by making contributions of $250 at the end of each month. He expects to earn 10.8% compounded monthly. How long will it take Marv to reach his goal? (rounded up to the nearest whole year)

Accepted Answer

A)  34 years 
B)  41 years 
C)  155 years 
D)  14 years 
E)  26 years

Question 20

Calculate the nominal and effective rate of interest for the following ordinary annuity. Determine the nominal interest rate whose compounding interval equals the payment interval.

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Exam 11: Annuities: Periodic Payment, Number of Payments, and Interest Rate

Calculate the periodic payment for the following ordinary annuity.

Susan's car loan payments are $265.08 at the end of each month for four years. The amount she borrowed was $12,000. What is the monthly compounded nominal interest rate?

Brian has a mortgage of 150,000 on which he is making monthly payments of $1,200 for 20 years. What rate of interest compounded quarterly is Brian paying?

If regular month-end deposits of $200 in a savings account amounted to $7,727.62 after three years, what monthly compounded nominal rate and effective rate of interest were paid on the account?

If $100,000 will purchase a 20-year annuity paying $739 at each month's end, what monthly compounded nominal rate and effective rate of interest are earned by the funds?

Calculate the nominal and effective rate of interest for the following ordinary annuity. Determine the nominal interest rate whose compounding interval equals the payment interval.

$2,000 will be contributed to an RRSP at the end of every six months for 20 years. What effective rate of return must the funds in the plan earn if it is to be worth $250,000 at the end of the 20 years?

Farah has $600,000 in her RRSP and wishes to retire. She is considering using the funds to purchase an annuity that earns 5% compounded annually and pays her $3500 at the end of each month. If she buys the annuity, for how long will she receive payments?

Marion is receiving payments of $500 per month for 20 years. In order to receive these payments, she deposited $90,000 in to an account with monthly compounding. What rate of interest did the account pay?

Fred must pay a $25,000 obligation one year from now. What end-of-month payments for twelve months would put the creditor in an equivalent financial position if the creditor can earn 9% compounded monthly?

Calculate the term, expressed in years and months, of the following ordinary annuity.

Rentown advertised a computer system at a cash price of $1699 and at a rent-to-own rate of $129 at the beginning of each month for 24 months. What effective rate of interest is a customer paying to acquire the computer in a rent-to-own transaction?

Determine the present value of $450 quarterly payments made at the start of each quarter for 7 years, assuming a rate of interest of 6.5% compounded monthly.

Susan bought a car for $25,000 and is making monthly payments at 7.25% compounded quarterly over four years. At the end of four years, Susan will owe $8,000. What is the amount of Susan's monthly payment?

How much longer will it take month-end RRSP contributions of $500 to accumulate $500,000 than month-end contributions of $550? Assume that the RRSP earns 3.75% compounded monthly. Round the time required in each case to the next higher month.

What effective interest rate will Frankie have to earn if his investments of $2,000 at the end of every three months for 20 years are to have a maturity value in 20 years of $1,000,000?

Marvin's goal is to accumulate $1,000,000 in his retirement plan by making contributions of $250 at the end of each month. He expects to earn 10.8% compounded monthly. How long will it take Marv to reach his goal? (rounded up to the nearest whole year)

Calculate the nominal and effective rate of interest for the following ordinary annuity. Determine the nominal interest rate whose compounding interval equals the payment interval.