Exam 11: Annuities: Periodic Payment, Number of Payments, and Interest Rate

Jinny is buying new windows for her house. The contractor is offering "no money down, and no payments for six months." The total cost of the windows is $12,500 and Jinny will be making monthly payments starting in six months at 9.5% compounded annually for four years. What is Jinny's monthly payment?

A conditional sale contract for a $1,450 transaction required a 10% down payment with the balance to be paid by 12 equal monthly payments. The first payment is due six months after the date of the purchase. The retailer charges an interest rate of 13% compounded semi-annually on the unpaid balance. What is the monthly payment?

Calculate the nominal and effective rate of interest for the following ordinary annuity. Determine the nominal interest rate whose compounding interval equals the payment interval.

Brenda and Tom want to save $30,000 over the next four years for a down payment on a house. What amount must they regularly save from their month-end pay if their savings can earn 5.5% compounded semi-annually?

A $10,000 debt is repaid by payments of $800 at the end of each quarter for five years. What quarterly-annually compounded nominal interest rate was charged on the loan?

Calculate the periodic payment for the following ordinary annuity.

Determine how long a $45,000 deposit will sustain quarterly withdrawals of $800 if interest is at 6.14% compounded annually.

Calculate the term, expressed in years and months, of the following ordinary annuity, using the financial calculator.

You have the option receiving $4,000 at the end of every six months for 15 years or a single lump sum of $250,000 at the end of the 15 years. What effective interest rate would make the two options equal in value?

An advertisement for a new car offers 1.2% compounded monthly financing for the first 24 months of a 5-year, $35,000 loan. The payments are $650 per month for the entire 60 months. What monthly compounded nominal interest rate is being applied to the final three years?

How many monthly payments of $919 will it take to pay off a mortgage loan if a $121,500 loan at 7% compounded semi-annually?

Marilyn is receiving $3,000 per quarter for 30 years. In order to receive these payments, she deposited $305,000 into an account with semi-annual compounding. What rate of interest did the account pay? How much interest did the account earn?

Seth is supposed to pay $10,000 to Megan today. What payments at the end of each quarter for the next two years would be economically equivalent to the scheduled payment if money can earn 7.5% compounded quarterly?

What quarterly compounded nominal rate and effective rate of interest are being charged on a $5,000 loan if quarterly payments of $302.07 will repay the loan in 5½ years?

David has the option to pay for auto insurance on either a lump sum basis of $2,000 per year or $180 per month. Determine the effective rate of interest (based on monthly compounding) if David chooses the monthly payment option.

An annuity purchased for $175,000 pays $4,000 at the end of every quarter. How long will the payments continue if the funds earn 7% compounded semi-annually?

When Barry reaches his 40^th birthday he will receive $10,000 which he will put into his retirement fund. His goal is to have $500,000 in the retirement fund on his 65^th birthday. To reach his goal, he will make equal deposits of $1,520 at the end of every six months leading up to his 65^th birthday. He can expect his investments to earn 13% compounded semi-annually. At what age must he start the semi-annual deposits of $1,520 in order to reach his goal?

Suppose that you contribute $425 per month to your RRSP. Rounding up to the nearest month, how much longer will it take for the RRSP's value to reach $500,000 if it earns 4.2% compounded annually than if it earns 4.2% compounded monthly?

Calculate the term, expressed in years and months, of the following ordinary annuity.

Sofia has been approved an RBC Royal Bank four-year $25,000 car loan at 7.5% compounded monthly. What end-of-month payments will reduce the balance on the loan after four years to the expected trade-in value of $4000,