question 19

1. Calculating Future Values (LO1) You have just made your first $5,000 contribution to your RRSP. Assuming you earn an 11% rate of return and make no additional contributions, what will your account be worth when you retire in 45 years? What if you wait ten years before contributing? (Does this suggest an investment strategy?)

Calculating Rates of Return (LO3) On February 2, 2016, an investor held some Province of Ontario stripped coupons in selfadministered RRSP at ScotiaMcLeod, an investment dealer. Each coupon represented a promise to pay $100 at the maturity date on January 13,2022, but the investor would receive nothing until then. The value of the coupon showed as $76.04 on the investor's screen. This means that the investor was giving up $76.04 on February 2, 2016, in exchange for $100 to be received just less than six years later. a. Based upon the $76.04 price, what rate was the yield on the Province of Ontario strip? b. Suppose that on February 2,2017 , the security's price was $81.00. If an investor had purchased it for $76.04 a year earlier and sold it on this day, what annual rate of return would she have earned? c. If an investor had purchased the security at market on February 2, 2017, and held it until it matured, what annual rate of return would she have earned