Exam 9: Compound Interest: Further Topics and Applications

The price of Biomed Corp. shares began a two-year period at $12, but fell 25% in each year. What was their overall percent decline in price?

For three successive years, an investment paid annual rates of return of 3.5%, 4.8%, and 2.75%. Calculate the funds equivalent annually compounded rate of return over the three years.

For a two-year GIC, what nominal rate compounded quarterly would pay the same amount of interest as 3.8% compounded annually?

A trust company pays 3.5% compounded semiannually on its three-year GICs. For you to prefer an annually compounded GIC of the same maturity, what value must its nominal interest rate exceed?

The Canadian Consumer Price Index (based on a value of 100 in 1971) rose from 97.2 in 1970 to 113.5 in 1980. What was the (equivalent) annual rate of inflation in the decade of the 1970s?

The maturity value of a $5,000 four-year compound- interest GIC was $5,839.72. What quarterly compounded rate of interest did it earn?

If the Consumer Price Index rose from 109.6 to 133.8 over an 8½-year period, what was the equivalent compound annual inflation rate during the period?

Seven years before it matures the value of a $1,000 strip bond is $672. What is the semi-annually compounded nominal interest rate?

At what monthly compounded nominal rate of interest will money triple in eight years?

$100,000 face value strip bonds were sold at 24% of face value to yield 7.14% compounded monthly. Calculate the maturity date to the nearest day.

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

Over a five-year period, Hardip's $2,000 investment grew to $2675. At the same time, the CPI increased from 106.1 to 109.1. What was Hardip's real compound rate of return?

A bank quotes 7.25% compounded monthly on a loan. What is the effective rate of interest charged?

An investment earned 8% compounded quarterly for 10 years, and then 5.15% compounded semi-annually for another 15. Determine the annual rate of interest per year compounded monthly.

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 total return?

A number of years ago, your client invested $6,000 at a rate of return of 9% compounded annually. If the investment is currently worth $10,968.25, for how long has she held the investment?

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

A stock valued at $150 increased by 25% and then decreased by 25%. What was the value of the stock after the decrease?

An initial $1,800 investment was worth $2120.31 after two years and nine months. What quarterly compounded nominal rate of return did the investment earn?

Marcie received an invoice for $150, with terms 2/15, net 30. Determine the effective annualized rate of return equivalent to the discount.