Gabrielle, a 22-year old P&L analyst, has been working for one year after graduating with a degree in business and finance.

She has decided to start saving for retirement. She has a chequing account that earns 1% compounded annually, and she

decides to transfer this amount into an RRSP that invests in the bond market. The manager at her local bank assures

her that the RRSP she chose would generate returns of 8% compounded quarterly. Thanks to her finance background,

Gabrielle knows the importance of being a well-informed investor and asks a series of important questions to the bank

manager. What answers would the bank manager provide Gabrielle for the following questions?

a.

How long (rounded up to the next month) will it take for an investment to double while earning interest at the offered

rate of 8% compounded quarterly?

b.

If the offered rate was compounded daily instead of quarterly, how long (rounded up to the next month) would it take

for an investment to double?

c.

Gabrielle wants to triple her original investment in the RRSP before her retirement in 45 years. Is this achievable at the

offered rate? Support your answer with an example.

d.

At what rate compounded monthly would her investment triple in 45 years?

e.

What is the effective rate of the monthly compounded rate calculated in part (d)?

f.

She wants to know if investing her money at 8% compounded monthly or at 8% compounded semi-annually would give

her a higher accumulated value than the offered rate at the end of the same time period. Provide a suitable example with

calculations to demonstrate the manager's approach to answering her question.

g.

If she wants to withdraw an amount equal to 50% of the original amount invested at the end of 5 years and another

amount equal to 50% of the original amount invested at the end of 10 years, what percent of her original investment

would be available for withdrawal at the end of 15 years?

h.

If she would like to make a deposit equal to 25% of the original investment in 5 years and another deposit equal to 75%

of the original investment in 10 years, what percent of her original investment would be available for withdrawal at the

end of 15 years?