Exam 9: Compound Interest: Further Topics and Applications

One year ago, Morgan invested $5,000 to purchase 400 units of a mutual fund. He has just noted in the Financial Post that the fund's rate of return on investment for the year was 22% and that the current price of a unit is $13.75. What amount did the fund distribute as income per unit during the year?

Your client invests $10,000 today at a rate of return of 7.7% compounded quarterly. Rounded to the nearest month, how long will it take the investment to grow to $22,000?

An investment had the following 4 year returns: -8%, 15%, 10% and -5%. Determine the average annual rate of return.

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

On overdue accounts the telephone company charges 1.25% per month. What is the effective annual rate?

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

For three successive years, an investment paid annual rates of return of 5.8%, 3.4%, and -2.25%. Calculate the funds equivalent annually compounded rate of return over the three years.

A bank offers a rate of 5.3% compounded semiannually on its four-year GICs. What monthly and annually compounded rates should it quote in order to have the same effective interest rate at all three nominal rates?

What quarterly compounded rate is equivalent to 10.5% compounded monthly?

Rounded to the nearest month, calculate how long it will take money to lose half its purchasing power to a 3.25% inflation rate.

If an interest rate of 6.9% compounded semiannually is charged on a car loan, what effective rate of interest should be disclosed to the borrower?

Marilyn was supposed to pay $1,450 to Bernice on March 1. Some time later Marilyn paid Bernice an equivalent payment of $1,528.01, allowing for a time value of money of 4.5% compounded monthly. When did Marilyn make the payment?

At 11.4% compounded quarterly, how long will it take for money to double?

Calculate the effective annual rate for 9.4% compounded quarterly.

At what annually compounded interest rate will an investment of $71,294.69 double in 90 months?

Banks usually quote residential mortgage interest rates on the basis of semiannual compounding. An independent mortgage broker is quoting rates with monthly compounding. What rate would the broker have to give to match 6.5% compounded semiannually available from a bank?

What quarterly compounded rate is equivalent to 3.5% compounded semiannually?

A $6300 face-value investment earning interest at 10% compounded annually for a six-year term was sold for $7550. How many years before its maturity date was the note sold if it was discounted to yield 12% compounded monthly?

Which of the flowing nominal interest rates has the highest effective rate: 12% compounded annually, 11.9% compounded semiannually, 11.8% compounded quarterly, or 11.7% compounded monthly?

If an interest rate of 8.9% compounded semiannually is charged on a car loan, what effective rate of interest should be disclosed to the borrower?