• The first 8 QUESTIONS in PART A deal with Compound Interest
• The last 4 QUESTIONS in PART B deal with Simple Interest/Breakeven
• Open Book: Use ANY Formula's, notes, examples, and your calculators!! s

Number of days in a month (Assume no Leap Years):

January-31 February-28 March-31 April-30 May-31 June-30

July-31 August-31 September-30 October-31 November-30 December-31

Compounding Frequency m

Annually 1

Semi-Annually 2

Quarterly 4

Monthly 12

(Part A) Questions 1-8: Compound Interest (Total 18 marks)

1. What is the FUTURE VALUE (FV) of $20,000.00 at 5% p.a. for Seven (7) years, if the rate is compounded: (2 marks)

a) annually

b) semi-annually

c) quarterly

d) monthly

1. $1,000 grew to $1,700 in exactly 5 years, what was the nominal rate of interest COMPOUNDED Quarterly that was used?

(2 marks-10.2-Find "i")

1. $85,000 is deposited into an account that earns 9% compounded semi-annually for 7 years and 8 months. Determine: (2 marks)
   1. The total amount in the account at the end of 7 years and 8 months (Future Value)
   2. The interest included in that Future Value.

1. The Toronto Estonian Credit union charges 7% compounded monthly on certain type of loan. The want to convert that to a rate compounded semi-annually, that maintains the same effective rate. Determine: (2 marks)
   1. The effective rate of 7% compounded monthly.
   2. The nominal rate (j) of interest compounded semi-annually that is equal to 7% compounded monthly.

1. Find the effective rate of interest (f) for the following AND indicate which is the highest rate (2 marks).

a. 15.55% compounded monthly

b. 15.75 % compounded quarterly

c. 15.85 % compounded semi-annually

d. 16 % compounded annually

1. Debts of $500 due 27 months ago from today and $800 due in 3 years from today will be replaced by a $300 payment in one (1) year from today and another payment in two (2) years from today. If the cost of money (the cost of the loan) is 6% compounded quarterly, how large should that unknown payment be? (Best Focal Point is in 2 years from today)- (Equivalent Value question-use timeline-4 marks)

(If you get the answer right, you get full marks, even without a, b & c)

1. What is the value of $500 at the focal point?
2. What is the value of $800 at the focal point?
3. What is the value of $300 at the focal point?
4. What is the amount of the unknown payment in 2 years?

1. A UNKNOWN sum of money was invested TODAY at 6% compounded monthly for 2.5 years and at 4% compounded quarterly for another 3.5 years. If there was $403,703.85 in the account in 6 tears from today, what was the original unknown amount invested today? (2 marks)

1. If a sum of money tripled (IE grew from $10,000 to $30,000) at 15% compounded semi-annually, how long (in years) would that take? (2 marks-Find "n")

(Part B) Questions 9-12: Simple Interest (Total 12 marks)

1. Fill in the missing values in the chart below correct to two decimal places.

(2 total)

	Principal (P)	Rate (r)	Time (t)	Interest (I)
a.	$23,456.00	9 % p.a.	200 days
b.		5 % p.a.	39 months	$50,895
c.	$10,800	% p.a.	1.25 years	$3,375
d.	$80,000	9 % p.a.	_______months	$15,600

10)Floating Sails Inc. makes little wooden sailboats and sells them for $120 each online. The costs associated with the business include $36 in variable costs (wood and labour) and Fixed costs of $168,000 (rent and other overhead). Determine: (4 marks)

a. the number of boats needed to be sold per month to breakeven.

b. the profit if the sell 3,000 ships (everything else stays the same)

c. the number of ships that must be sold to make a profit of $252,000

d. the maximum amount of Fixed Costs (FC) that can be incurred to breakeven if they sell exactly 800 ships? (SP and VC stary the same)

1. A demand loan of $30,000 is taken out today at 6% p.a. (simple interest) and uses the declining balance method of repayment. The loan will be fully paid off with payments of $10,000 in 2 years from today, $15,000 in 4 years from today and a final payment in 8.5 years from today. How large is that last unknown payment? (3 marks total)
   1. How much is still owing after the $10,000 payment?
   2. How much is still owing after the $15,000 payment?
   3. How large will the last unknown payment be?

1. You borrowed $10,000 from the Estonian Airline Credit Union at 3% p.a. calculated on the monthly-unpaid balance. You agreed to repay the loan inblended payments of $3,000 per monthand one final payment in 4 months. The blended payments would include interest and principal repaid in the payment. Using the following table, fill in a repayment schedule for the loan: (3 marks)

Payment Number	Balance before payment	Amount Paid	Interest paid. (Monthly rate of interest) ________	Principal repaid	Balance after payment
0					$10,000
1		$3,000
2		$3,000
3		$3,000
4		?_________ ?