Exam 9: Compound Interest: Further Topics and Applications

Find the monthly compounded nominal interest rate that is equivalent to an effective rate of 21%.

Camille can obtain a residential mortgage loan from a bank at 8.75% compounded semiannually or from an independent mortgage broker at 8.6% compounded monthly. Which source should she pick if other terms and conditions of the loan are the same? Present calculations that support your answer.

A $25,000 strip bond is purchased for $8235 to yield 8% compounded semiannually. What is the remaining time until maturity?

After 27 months of quarterly compounding, a $3,000 debt had grown to $3,810. What effective rate of interest was being charged on the debt?

Patty Lo purchased a house that she planned to use as a rental property for $300,000. During the past year, she rented the house for $1750 per month. Property taxes were $3900 for the year, and other expenses were $450 for a new garage door opener and $650 for lawn care. The current appraised value of the property is $315,000. What is Patty Lo's rate of total return?

Calculate the equivalent interest rate (to the nearest 0.01%)

A $10,000 investment grew to $12,000 after 39 months of semiannual compounding. What effective rate of return did the investment earn?

Calculate the term of the loan or investment:

Belleville Credit Union has established interest rates on its three-year GICs so that the effective rate of interest is 4% on all three compounding options. What are the monthly, semiannually, and annually compounded rates?

Is it possible for the capital gain yield to exceed 100%? Explain or give an example.

The Calgary Real Estate Board reports that house prices increased by 5% during the first seven months of the year. If prices continue to rise at the same rate for the subsequent five months, what will be the (compound) increase for the entire year?

What amount compounded monthly is equivalent to 6.75% compounded semi-annually?

An investment earned 6.3% compounded annually for two years, 5.4% compounded semi-annually over another 2 years, and 4.5% compounded quarterly over the last 6 years. Determine the average annual rate of return over this 10 year period based on monthly compounding.

An effective rate of 11.4% has a nominal rate of 10.84% based on monthly compounding.

Determine the annual effective rate of a credit card offering 1.3% monthly.

A demand loan for $8,000 with interest at 16% compounded quarterly was repaid after two years and eight months. What was the amount of interest paid?

9.1% compounded annually is a better investment than 8.8% compounded monthly.

Calculate nominal rate of interest (to the nearest 0.01%):

Calculate the missing interest rate (to the nearest 0.01%)

Lansky Finance Company was charging 1.87% per month on overdue accounts but negative publicity and public pressure made them decide to reduce the rate. What monthly finance charge would result in an annual effective rate of 19.99%?