Exam 9: Compound Interest: Further Topics and Applications

Three years ago Mikhail invested $7,000 in a three-year compound interest GIC. He has just received its maturity value of $7,867.34. What was the monthly compounded rate of interest on the GIC?

The proceeds from the sale of a $4,500 five-year promissory note bearing interest at 5% compounded quarterly were $5277.81. How long before its maturity date was the note sold if it was discounted to yield 6.3% compounded monthly?

Is the effective rate of interest ever numerically smaller than the nominal interest rate?

Three years ago, General Avionics announced plans to triple its annual R&D spending over the next 4 years. If R&D spending was increased by 25%, 30%, and 35% in the first 3 years, what minimum percent increase is required in the fourth year to reach the target?

The federal government cut transfer payments to the provinces by a total of 20% over a five-year period. In the next budget speech, the Minister of Finance announced "the level of transfer payments will be restored to their former level by a 20% increase to be phased in over the next two years." Is this an accurate statement? Explain briefly.

An original loan of $6,500 has accumulated to $10,093.14 based on 9.2% interest compounded annually. The loan is five years old.

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

$5,000 invested in a GIC earning 3.7% compounded semiannually earned interest of $789.73.What was the term of the GIC?

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

If money is worth 8% compounded quarterly, how long (to the nearest day) before a scheduled payment of $6,000 is $5,000 an equivalent payment? For the purpose of determining the number of days in a partial calendar quarter, assume that a full quarter has 91 days.

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

What semiannually compounded rate is equivalent to 8.5% compounded quarterly?

If an invoice indicates that interest at the rate of 2% per month will be charged on overdue amounts, what effective rate of interest will be charged?

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

Over nine years Craig earned interest of $29,700 on an investment of $16,000. What effective rate of return did he earn?

How long will it take a $1,000 investment to grow to $1500 if it earns 3.8% compounded annually?

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

The Canadian Consumer Price Index (based on a value of 100 in 1971) rose from 97.2 in 1970 to 210.6 in 1980 and (based on a value of 100 in 1986) rose from 67.2 in 1980 to 119.5 in 1990. Calculate the annual rate of inflation for the period 1970-1990.

The market value of Stephanie's bonds has declined from $1053.25 to $1021.75 per bond during the past year. In the meantime she has received two semiannual interest payments of $35. Calculate Stephanie's income yield, capital gain yield, and rate of total return for the year.

What effective rate of interest is equivalent to a nominal rate of 19.214% compounded monthly?