Question 1

A 70-year-old male can purchase either of the following annuities for the same price from a life insurance company. A 20-year-term annuity will pay $394 at each month-end. A life annuity will pay $440 at the end of each month until the death of the annuitant. Beyond what age must the man survive for the life annuity to have the greater economic value? Assume that money can earn 3.3% compounded monthly.

Accepted Answer

The answer of A 70-year-old male can purchase either of...

Question 2

After 15 years of contributions of $3,500 at the end of every six months to a Retirement Savings Plan, the accumulated amount stood at $232,536. What semi-annually compounded nominal rate of return was earned by the funds in the RSP?

Accepted Answer

A)  2.5% 
B)  5.0% 
C)  7.5% 
D)  10.0% 
E)  12.5%

Question 3

Helen and Morley borrowed $20,000 from Helen's father to make a down payment on a house. The interest rate on the loan is 8% compounded annually, but no payments are required for two years. The first monthly payment of $300 is due on the second anniversary of the loan. How long after the date of the original loan will the last payment be made?

Accepted Answer

The answer of Helen and Morley borrowed $20,000 from Helen's...

Question 4

Karen obtained a $20,000 loan at 8% compounded semi-annually. What monthly payment will repay the loan in 7½ years? How much interest will Karen pay over the life of the loan?

Accepted Answer

The answer of Karen obtained a $20,000 loan at 8%...

Question 5

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

Accepted Answer

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

Question 6

Calculate the amounts that must be invested at the end of every six months at 4.75% compounded semi-annually in order to accumulate $500,000 after 20 years.

Accepted Answer

The answer of Calculate the amounts that must be invested...

Question 7

A loan of $17,200 at 9% compounded monthly is to be paid off by equal payments to be made at the end of every month for three years. What is the size of the monthly payment?

Accepted Answer

A)  $561.48 
B)  $679.49 
C)  $606.78 
D)  $477.78 
E)  $546.96

Question 8

Novell Electronics recently bought a patent that will allow it to bring a new product to market in 2½ years. Sales forecasts indicate that the product will increase the quarterly profits by $28,000. If the patent cost $150,000, how long after the date of the patent purchase will it take for the additional profits to repay the original investment along with a return on investment of 15% compounded quarterly? Assume that the additional profits are received at the end of each quarter.

Accepted Answer

The answer of Novell Electronics recently bought a patent that...

Question 9

After 12 ½ years contributions of $750 at the end of each semi-annual period has accumulated into $24,510.47. If interest rate is compounded semi-annually, determine the effective annual rate of the investment.

Accepted Answer

A)  8.08% 
B)  8.62% 
C)  9.08% 
D)  9.58% 
E)  10.08%

Question 10

Martina's RRSP earns 12% compounded monthly and her goal is to accumulate $1,000,000 by making deposits of $4,100 at the end of every year. How many years will it take to reach her goal?

Accepted Answer

A)  24 years 
B)  29 years 
C)  33 years 
D)  47 years 
E)  125 years

Question 11

For a long time, Sally has been investing $7,000 at the end of every six months. The value of her savings today is $2,500,000. She has made wise investment decisions and has earned a return of 16.4% compounded semi-annually. How long ago (rounded off to the nearest whole year) did Sally start this savings plan?

Accepted Answer

A)  17 years 
B)  22 years 
C)  27 years 
D)  32 years 
E)  41 years

Question 12

Shawn wishes to have $150,000 in his retirement account in 20 years' time. In the last 10 years, Shawn estimates that he will be contributing $800 per quarter at the beginning of each period. Over the first 10 years, he will be contributing $150 per month at the start of each month. If the rate of interest is 4.4% compounded quarterly over the 20 year period, determine the initial deposit that Shawn needs to make to achieve his retirement goal.

Accepted Answer

A)  $27,823.81 
B)  $28,999.12 
C)  $29,153.92 
D)  $30,787.44 
E)  $31,088.73

Question 13

Noreen's RRSP is currently worth $125,000. For the next 10 years, she will make contributions at the end of every six months. How much does Noreen need to contribute at the end of every six months for the next 10 years to reach her goal of having a total of $500,000 when she retires? Her RRSP earns 8% compounded annually.

Accepted Answer

The answer of Noreen's RRSP is currently worth $125,000. For...

Question 14

As of Betty's fifty-sixth birthday, she has accumulated $195,000 in her RRSP. She has ceased contributions but will allow the RRSP to grow at an expected 8.4% compounded monthly until she reaches age 65. Then she will use the funds in the RRSP to purchase a 20-year annuity. What will her end-of-month annuity payments be if the money used to purchase the annuity earns 7.2% compounded monthly?

Accepted Answer

The answer of As of Betty's fifty-sixth birthday, she has...

Question 15

A $350,000 loan has an interest rate of 6.2% compounded semi-annually. Determine the semi-annual payments that will reduce the balance to $80,000 after 4 years

Accepted Answer

A)  $47,909.55 
B)  $45,089.24 
C)  $44,224.58 
D)  $42,806.17 
E)  $41,105.65

Question 16

Lindsay plans to deposit $8,000 in an investment paying 4.8% interest compounded semi-annually, along with semi-annual deposits of $1,000 at the start of each period for 3 years. After the third year, Lindsay will increase her deposits to monthly payments of $250 per month at the start of each month for the next two years. Determine the future value of this investment in year 5.

Accepted Answer

A)  $21,873.47 
B)  $23,621.40 
C)  $25,585.33 
D)  $26,108.45 
E)  $27,407.66

Question 17

Calculate the periodic payment for the following ordinary annuity, using the financial calculator.

Accepted Answer

The answer of Calculate the periodic payment for the following...

Question 18

Calculate the periodic payment for the following ordinary annuity.

Accepted Answer

The answer of Calculate the periodic payment for the following...

Question 19

Roxy is about to purchase a $40,000 vehicle. She plans to pay $10,000 down and finance the rest over 4 years at a rate of 5.2% compounded annually. Determine the monthly payments that are to be made at the start of each month.

Accepted Answer

A)  $589.05 
B)  $609.05 
C)  $689.05 
D)  $705.42 
E)  $729.50

Question 20

Clarence has a retirement fund of $300,000 that earns 11% compounded monthly. His plan is to withdraw $3,000 at the end of every month for 12 years and then increase the monthly withdrawals to $5,000. How many $5,000 withdrawals will he be able to make?

Accepted Answer

A)  30 
B)  43 
C)  48 
D)  51 
E)  59

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

After 15 years of contributions of $3,500 at the end of every six months to a Retirement Savings Plan, the accumulated amount stood at $232,536. What semi-annually compounded nominal rate of return was earned by the funds in the RSP?

Karen obtained a $20,000 loan at 8% compounded semi-annually. What monthly payment will repay the loan in 7½ years? How much interest will Karen pay over the life of the loan?

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

Calculate the amounts that must be invested at the end of every six months at 4.75% compounded semi-annually in order to accumulate $500,000 after 20 years.

A loan of $17,200 at 9% compounded monthly is to be paid off by equal payments to be made at the end of every month for three years. What is the size of the monthly payment?

After 12 ½ years contributions of $750 at the end of each semi-annual period has accumulated into $24,510.47. If interest rate is compounded semi-annually, determine the effective annual rate of the investment.

Martina's RRSP earns 12% compounded monthly and her goal is to accumulate $1,000,000 by making deposits of $4,100 at the end of every year. How many years will it take to reach her goal?

A $350,000 loan has an interest rate of 6.2% compounded semi-annually. Determine the semi-annual payments that will reduce the balance to $80,000 after 4 years

Calculate the periodic payment for the following ordinary annuity, using the financial calculator.

Calculate the periodic payment for the following ordinary annuity.

Roxy is about to purchase a $40,000 vehicle. She plans to pay $10,000 down and finance the rest over 4 years at a rate of 5.2% compounded annually. Determine the monthly payments that are to be made at the start of each month.

Clarence has a retirement fund of $300,000 that earns 11% compounded monthly. His plan is to withdraw $3,000 at the end of every month for 12 years and then increase the monthly withdrawals to $5,000. How many $5,000 withdrawals will he be able to make?