1. To finance a vacation in four years, Bernadette saves $530 at the beginning of every three months in an account paying interest at 3.92% compounded quarterly. a. What will be the balance in her account when she takes the vacation? b. How much of the balance will be interest? c. If she waits an additional year to start her vacation, and continues to save the same amount of money, how much more money will she have for her trip? 2. Leo made deposits of $25 at the end of every month for 10 years in a savings account paying 3.5% compounded monthly. He plans on leaving his savings in the account for another 5 years. Assuming that the interest rate in his savings account is fixed during the entire time period, a. How much would Leo have in his account at the end of the 15 years? b. How much would Leo have actually contributed to his savings over the 15 years? c. What would be the total interest earned on this investment? 3. Sandu intends to contribute $2,500 to his RRSP every six months, starting today, and continuing for a total of 20 years. If the RRSP earns 8% compounded semi-annually for the first seven years and 7% compounded semi-annually for the last 13 years, what amount will he have in the plan 20 years from now? 4. Dina bought a dining set on a contract that requires monthly payments of $62.25 for three years. The first payment is made on the date of signing and interest is 24% compounded monthly. a. What was the purchase price of the dining set? b. How much will Dina pay in total by the end of the three years? c. How much of what she pays will be interest? 5. Raj just turned 43 and has already accumulated $34,500 in his RRSP. He makes month-end contributions of $300 to the plan and intends to do so until age 60. He plans to retire then and cease further contributions. The RRSP will be allowed to continue to accumulate earnings until he reaches age 65. If the RRSP earns 4.2% compounded semi-annually for the next 22 years, what amount will his RRSP contain when he reaches age 65? 6. A new owner purchased a condominium unit by contracting to make annual payments of $21,300 for eight years. If the first payment is due on the date of purchase and interest is 3.98% compounded quarterly, what is the purchase price of the property? 7. Sienna wants to buy a cottage but can afford to pay only $833.33 at the end of every month for the mortgage of 2.9% compounded semi-annually for the next 20 years. If she has $10,000 for the down payment, calculate the value of a cottage she can afford, her total investment, and interest paid over the mortgage period. 8. What is the fair market value for a retirement annuity that would provide $3000 at the end of each month at 5% compounded quarterly for the first 10 years and $3000 at the end of each month at 6% compounded quarterly for the following 5 years? 9. You want to invest in 15-year annuity that will pay you $3,600 per quarter for the first 7 years and $2,500 per month for the last 8 years. If the annuity earns 8.5% compounded annually for the first 7 years and 7.5% compounded semi-annually for the remaining 8 years, what would be the amount of your initial investment? 10. The required monthly payment on a four-year loan bearing interest at 4% compounded monthly is $389.10. a. What was the original principal amount of the loan? b. What is the balance owed just after the 27th payment? c. In total, how much interest was paid out, in total, if the balance owed was paid after the 27th payment? 11. Loan payments of $600 at the beginning of each month were being made towards a brand new luxury car for a term of 5 years at 3.9% compounded annually. a. Calculate the purchase price of the car if a down payment of $1000 was also required at the time of purchase. b. How much will have been contributed towards paying off the loan by the end of the 5 years? How much of this is interest? c. What is the balance owing on the loan after the 48th payment? How much interest is paid out, in total, if the balance owed is paid after the 48th payment? 12. Elijah purchased a diamond necklace with a loan at 8.5% compounded quarterly. If he had to pay a down payment of $500 and then $250 at the beginning of every 3 months for 3 years, what was the purchase price of the necklace and how much interest did he have to pay over the period of the loan? 13. An investment will pay you $50 at the end of every six months for 17 years. At the end of the 17 years, the investment will pay you an additional $1,000 along with the last regular $50 payment. What is the fair market value of the investment if the prevailing rate of return on similar investments is 4.5% compounded semi-annually? 14. You want to buy a new flat screen television and have found pricing information from two major retailers: a. Retailer A: Pay $162.50 at the end of each month for the next 12 months. b. Retailer B: $500 today and an additional $72.50 at the end of each month for the next 18 months. Which alternative is economically preferable if money is worth 6% compounded quarterly? In current dollars, how much will you save by selecting the preferred alternative.

15. The winner of a grand prize in a lottery can choose either $1,000,000 per year for 25 years or a single cash payment of $17,000,000 today. Which option should be chosen if payments are made at the beginning of each year and money can earn 3.2% compounded semi-annually? In todays dollars, what is the economic advantage of the preferred choice?