Question 1

Kristina has saved $3,500 so far, but wants to have $8,000 in three years. If her account pays 4.5% compounded semi-annually, how much should Kristina save each month to reach her goal?

Accepted Answer

The answer of Kristina has saved $3,500 so far, but...

Question 2

Matthew wants to buy a motorcycle. He feels he will need $20,000 and is saving $500 monthly. If his account earns 5.5% compounded semi-annually, how long will it take for Matthew to have $20,000 saved?

Accepted Answer

The answer of Matthew wants to buy a motorcycle. He...

Question 3

Bosley has $750,000 which is earning 7.2% compounded monthly. At the end of every month for the next 10 years he plans to withdraw $5,000. After that he wants to increase his equal monthly withdrawals to the largest amount possible for 15 more years. What is that amount?

Accepted Answer

A)  $5,733 
B)  $5,917 
C)  $6,029 
D)  $6,315 
E)  $6,977

Question 4

Calculate the size of the monthly mortgage loan payment if a $121,500 loan at 7% compounded semi-annually is to be paid off over 18 years.

Accepted Answer

A)  $983.75 
B)  $990.84 
C)  $998.00 
D)  $598.80 
E)  $716.44

Question 5

What payments must be made at the end of each quarter to an RRSP earning 4.2% compounded annually so that its value 8½ years from now will be $15,000?

Accepted Answer

The answer of What payments must be made at the...

Question 6

Matthew borrowed $27,000 for his car. He is making payments of $525 per month for five years. If interest is compounded quarterly, what rate of interest is Matthew paying?

Accepted Answer

The answer of Matthew borrowed $27,000 for his car. He...

Question 7

What would be the effective rate of interest if $100,000 was accumulated by investments of $3,500 made at the end of every three months for five years?

Accepted Answer

A)  15.20% 
B)  14.40% 
C)  8.65% 
D)  13.12% 
E)  34.61%

Question 8

Another type of sales promotion for vehicles is to advertise the choice between a "Cash Purchase Price" or "0% Purchase Financing." The tiny print at the bottom of a GM Canada full-page advertisement included the statement: "The GMAC purchase finance rates are not available with and are not calculated on the 'Cash Purchase Price' shown. The difference between the price for the GMAC purchase finance offer and the 'Cash Purchase Price' offer is deemed under provincial laws to be a cost of financing." In other words, there are two prices for a vehicle-a lower price if you pay cash and a higher price if you want to take advantage of the "0% financing." An additional disconcerting aspect of this type of promotion is that the higher price for the 0% financing is usually not quoted in the advertisement. Rather, it must be negotiated with the dealer.
Suppose the Cash Purchase Price of a car is $23,498, and the price that qualifies for full 0% financing (with 48 monthly payments) turns out to be $26,198. What effective interest rate will you be paying for the "0% financing?"

Accepted Answer

The answer of Another type of sales promotion for vehicles...

Question 9

Bonnie and Clyde want to take a six-month leave of absence from their jobs to travel extensively in South America. Rounded to the next higher month, how long will it take them to save $40,000 for the leave if they make month-end contributions of $700 to their employer's salary deferral plan? The salary deferral plan earns 5.5% compounded semi-annually.

Accepted Answer

The answer of Bonnie and Clyde want to take a...

Question 10

Mr. Sandstrom's will directed that $20,000 be placed in each of two investment trusts for his grandchildren, Lena and Axel. On each grandchild's 18^th birthday, he or she is to receive the first of a series of equal quarterly payments running for 15 years. Lena has just turned 13, and Axel's age is 8 years, 6 months. If the funds earn 9.25% compounded semi-annually, what size of payment will each grandchild receive?

Accepted Answer

The answer of Mr. Sandstrom's will directed that $20,000 be...

Question 11

Malcolm wants to purchase an annuity that will pay him $7,000 at the end of every three months for 15 years. His financial advisor has told Malcolm that this annuity will cost him $250,000. What annually compounded nominal interest rate was used in this calculation?

Accepted Answer

A)  7.56% 
B)  9.3% 
C)  12.60% 
D)  18.89% 
E)  22.67%

Question 12

A loan of $45,000 calls for equal payments at the end of every three months for the next six years. What is the size of the payments if the interest rate is 14% compounded semi-annually?

Accepted Answer

A)  $3,924 
B)  $2,802 
C)  $3.817 
D)  $2,785 
E)  $3,395

Question 13

Silas is about to begin regular month-end contributions of $500 to a bond fund. The fund's long-term rate of return is expected to be 6% compounded semi-annually. Rounded to the next higher month, how long will it take Silas to accumulate $300,000?

Accepted Answer

The answer of Silas is about to begin regular month-end...

Question 14

Larissa is saving each month to accumulate $10,000 in six years. Her account pays 4.25% compounded quarterly. What amount should Larissa deposit monthly to reach her goal? How much interest does Larissa earn?

Accepted Answer

The answer of Larissa is saving each month to accumulate...

Question 15

What monthly payment is required to accumulate to a future value amount of $5,000 in four years if money earns 3.75% compounded monthly?

Accepted Answer

The answer of What monthly payment is required to accumulate...

Question 16

An advertisement for Ford trucks offered "2.9% financing (for 48 months) or $2,000 cash back." A truck buyer financed $20,000 at the low interest rate instead of paying $18,000 cash (after the $2,000 rebate). What was the effective rate of interest on the loan if the foregone cash rebate is treated as part of the cost of financing? (The 2.9% interest rate is a monthly compounded nominal annual rate.)

Accepted Answer

The answer of An advertisement for Ford trucks offered "2.9%...

Question 17

An investment of $25,000 is made for a 10-year term. After the term expires, equal withdrawals will be made at the end of every month for 15 years. What will the size of the monthly withdrawal be if the investment earns 9% compounded monthly for both the deposit and withdrawal periods.

Accepted Answer

A)  $253.57 
B)  $161.95 
C)  $621.58 
D)  $251.68 
E)  $616.96

Question 18

A finance company paid a furniture retailer $1934 for a conditional sale contract requiring 12 end-of-month payments of $175. What effective rate of return does the finance company earn on the purchase?

Accepted Answer

The answer of A finance company paid a furniture retailer...

Question 19

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

Accepted Answer

The answer of Calculate the term, expressed in years and...

Question 20

A loan of $16,525 at 10.8% compounded monthly is to be paid off by equal monthly payments of $650. How long will it take to pay off the loan?

Accepted Answer

A)  26 months 
B)  29 months 
C)  32 months 
D)  36 months 
E)  48 months

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