Question
I need some help with these practice questions. I feel like I'm doing them wrong. Question 1: Determine the accumulated value of $4100.00 compounded semi-annually
I need some help with these practice questions. I feel like I'm doing them wrong.
Question 1:
Determine the accumulated value of $4100.00 compounded semi-annually at 8% p.a. for seven years. (3 marks)
A=4100(1+0.08/2)14=$7,099.87
Question 2:
How much will a registered retirement savings deposit of $10000.00 be worth in 15 years at 6.00% compounded quarterly? How much of the amount is interest? (4 marks)
A=10000(1+0.06/4)60=24432.20-10000=$14,432.20
Question 3:
An investment of $21700 is accumulated at 5.24% compounded quarterly for three and one-half years. At that time the interest rate is changed to 6.12% compounded monthly. How much is the investment worth two years after the change in interest rate? (4 marks)
A=21700(1+0.0524/4)14=26037
26037(1+0.0612/12)24=$29,418
Question 4:
Determine the sum of money that will grow to $18 530 in four years, eleven months at 5.2% compounded quarterly. (3 marks)
18530=P(1+0.052/4)19.68
18530=P(1.2592)=$14,373.30
Question 5:
Calculate the present value of $12 500.00 due in two years and nine months if interest is 7.8% p.a. compounded semi-annually. (3 marks)
12500=P(1+0.078/2)5.5=$10,128.02
Question 6:
Debts of $850 due in six months, $700 due in sixteen months, and $1100 due in three years are to be settled by a single payment one year from now. What is the size of that single payment if interest is 7.5% compounded monthly? (6 marks)
F1=850(1+7.5/1200)6=882.38
F2=700(1+7.5/1200)4=682.77
F3=1100(1+7.5/1100)24=934.47
882.38+682.77+934.47=$2,499.62
Question 7:
In how many days will $770.00 grow to $880.00 at 11.5% p.a. compounded monthly? (4 marks)
T=log(880/770)/12[log(1+0.115/12)]=1.17 years= 427.05 days
Question 8:
If the effective rate of interest on an investment is 7%, what is the nominal rate of interest compounded quarterly? (4 marks)
=6.82%
Question 9:
At what nominal rate of interest compounded quarterly will $2000.00 earn $400.00 interest in three years? (4 marks)
r=4[(2400/2000)1/12-1] =6.12%
Question 10:
Karen started a registered retirement savings plan on February 1, 2000, with a deposit of $2210. She added $2000 on February 1, 2001, and $1475 on February 1, 2004. What is the accumulated value of her RRSP account on August 1, 2005, if interest is 10.44% compounded quarterly? (8 marks)
FV1=$2,449.92
FV2=2449.92+2000=4449.92=$6,062.17
FV3=6062.17+1475=7537.17=$8,797.24
Question 11:
In how many years will money triple at 12% compounded semi-annually? (4 marks)
T=log(3/1)/2[log(1+0.12/2)]=9.43 years
Question 12:
Scheduled debt payments of $1500.00 due seven months ago, $1200.00 due two months ago, and $1800.00 due in five months are to be settled by two equal payments now and three months from now respectively. Determine the size of the equal replacement payments at 9% p.a. compounded monthly. (8 marks)
Hint:Let the size of the equal payments be $x, and the focal point now.
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