Question 1

What amount was invested 35 years ago at 7% compounded semi-annually if the value of the investment has now grown to $1,000,000?

Accepted Answer

A)  $634,757 
B)  $111,128 
C)  $103,549 
D)  $89,986 
E)  $57,637

Question 2

Calculate the missing value:

Accepted Answer

The answer of Calculate the missing value:
...

Question 3

Faisal borrowed $3,000, $3,500, and $4,000 from his father on January 1 of 3 successive years at college. Faisal and his father agreed that interest would accumulate on each amount at the rate of 5% compounded semi-annually. Faisal is to start repaying the loan on the January 1 following graduation. What consolidated amount will he owe at that time?

Accepted Answer

The answer of Faisal borrowed $3,000, $3,500, and $4,000 from...

Question 4

Five years ago Sylvio borrowed $12,000 from Warren at 11% compounded annually. Two years ago he made a payment of $7,000 to reduce his debt. Now how much, including interest, does Sylvio owe to Warren?

Accepted Answer

A)  $14,339 
B)  $11,596 
C)  $9,217 
D)  $7,675 
E)  $5,972

Question 5

A $7,000 non-interest-bearing promissory note is discounted at 10% compounded quarterly, two years before maturity. What are the proceeds from the sale of the note?

Accepted Answer

A)  $6,829.27 
B)  $6,662.70 
C)  $5,785.12 
D)  $5,933.33 
E)  $5,745.23

Question 6

Tyrone wishes to save $35,000 in 5 years' time. In the last 2 years, he will contribute $125 per quarter in an account earning 3.6% compounded monthly. In the middle 2 years, he will contribute $75 per month with the same monthly contributions. He plans to contribute $1,000 semi-annually during the first year, in the same account. Using the financial functions on the calculator, determine the initial deposit to be made by Tyrone if he wishes to have $35,000 in his account in 5 years.

Accepted Answer

A)  $24,918.90 
B)  $24,990.11 
C)  $25,105.13 
D)  $25,427.15 
E)  $25,681.18

Question 7

A $4,000 payment has to be made 3 years from now and another $6,000 payment 5 years from now. Using the financial functions on the calculator, determine what lump sum payment 40 months from now will be equivalent to these two payments if interest is 5.2% compounded quarterly.

Accepted Answer

A)  $11,654.38 
B)  $11,253.35 
C)  $9,574.45 
D)  $9,224.69 
E)  $8,62.74

Question 8

Helen's investment of $500 has grown, at a rate of 13% compounded annually, for 45 years. What is the maturity value of her investment?

Accepted Answer

A)  $204,381 
B)  $129,667 
C)  $825 
D)  $82,592 
E)  $122,321

Question 9

Calculate the maturity value of a two-year, $20,000 Guaranteed Investment Certificate accumulating at 5% compounded semi-annually.

Accepted Answer

A)  $18,119 
B)  $20,000 
C)  $22,076 
D)  $23,612 
E)  $24,310

Question 10

The population of Ourtown, Saskatchewan is expected to grow at a rate of 2.5% per year for the next five years. If the current population is 11,763 what is it expected to be in five years?

Accepted Answer

A)  13,233 
B)  12,057 
C)  16,555 
D)  13,309 
E)  10,364

Question 11

A company borrowed $50,000 at 12% compounded monthly. It made a payment of $15,000 after two years, and $12,000 after three years. How much is required to pay off the loan one year after the second payment?

Accepted Answer

A)  $17,432.08 
B)  $42,636.06 
C)  $29,799.41 
D)  $48,043.38 
E)  $80,611.30

Question 12

A bank offers a four-year "Escalating Rate GIC" on which the interest rate for year one is 3% compounded annually, 4% compounded annually for year two, 5% compounded annually for the third year and 6% compounded annually for the fourth year. Determine the maturity value of a $100,000 four-year "Escalating Rate GIC".

Accepted Answer

A)  $116,794 
B)  $117,251 
C)  $118,704 
D)  $118,933 
E)  $119,225

Question 13

Give two examples of advertisements or news items that routinely ignore the time value of money.

Accepted Answer

The answer of Give two examples of advertisements or news...

Question 14

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.

Accepted Answer

The answer of Calculate the combined equivalent value of the...

Question 15

Wojtek purchased a $10,000 face value strip bond on a date when it had 14 years left until maturity. The purchase price was based on a market yield of 6.2% compounded semi-annually. He sold the bond 4 years later when the market yield was 5.2% compounded semi-annually. What was Wojtek's total gain on the investment?

Accepted Answer

The answer of Wojtek purchased a $10,000 face value strip...

Question 16

Boris recently turned 30, an event causing him to give thought to some long-range financial planning. He believes that, if he owns a home and is debt-free by age 60, he and his partner can retire and live comfortably on an annual income that is equivalent to $40,000 today. Fill in the cells of the following table with the nominal annual income needed to satisfy this criterion at each age under each of three inflation rate scenarios.

Accepted Answer

The answer of Boris recently turned 30, an event causing...

Question 17

Calculate the missing value:

Accepted Answer

The answer of Calculate the missing value:
...

Question 18

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.

Accepted Answer

The answer of Calculate the combined equivalent value of the...

Question 19

An investment of $2,500 earned interest at 4.5% compounded quarterly for 1½ years, and then 4.0% compounded monthly for two years. How much interest did the investment earn in the 3½ years?

Accepted Answer

The answer of An investment of $2,500 earned interest at...

Question 20

What amount today is equivalent to $6,800 three years ago, if money earned 12% compounded quarterly over the past three years?

Accepted Answer

A)  $8,872.46 
B)  $9,553.51 
C)  $9,695.17 
D)  $9,729.23 
E)  $4,769.38

Exam 8: Compound Interest: Future Value and Present Value

What amount was invested 35 years ago at 7% compounded semi-annually if the value of the investment has now grown to $1,000,000?

Calculate the missing value:

Five years ago Sylvio borrowed $12,000 from Warren at 11% compounded annually. Two years ago he made a payment of $7,000 to reduce his debt. Now how much, including interest, does Sylvio owe to Warren?

A $7,000 non-interest-bearing promissory note is discounted at 10% compounded quarterly, two years before maturity. What are the proceeds from the sale of the note?

A $4,000 payment has to be made 3 years from now and another $6,000 payment 5 years from now. Using the financial functions on the calculator, determine what lump sum payment 40 months from now will be equivalent to these two payments if interest is 5.2% compounded quarterly.

Helen's investment of $500 has grown, at a rate of 13% compounded annually, for 45 years. What is the maturity value of her investment?

Calculate the maturity value of a two-year, $20,000 Guaranteed Investment Certificate accumulating at 5% compounded semi-annually.

The population of Ourtown, Saskatchewan is expected to grow at a rate of 2.5% per year for the next five years. If the current population is 11,763 what is it expected to be in five years?

A company borrowed $50,000 at 12% compounded monthly. It made a payment of $15,000 after two years, and $12,000 after three years. How much is required to pay off the loan one year after the second payment?

Give two examples of advertisements or news items that routinely ignore the time value of money.

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.

Calculate the missing value:

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.

An investment of $2,500 earned interest at 4.5% compounded quarterly for 1½ years, and then 4.0% compounded monthly for two years. How much interest did the investment earn in the 3½ years?

What amount today is equivalent to $6,800 three years ago, if money earned 12% compounded quarterly over the past three years?