Exam 9: Compound Interest: Further Topics and Applications

A $10,000 face value strip bond was purchased for $4188.77. At this price, the bond provided a return of 5.938% compounded semiannually until the maturity date. To the nearest day, how long before the maturity date was the bond purchased? Assume that each half year is exactly 182 days long.

10.20% compounded monthly is equal to 10.69% compounded annually.

Carlita invested $10,000 for 25 years. For the first 15 years she earned 15% compounded semi-annually. For the last 10 years she earned 9.6% compounded monthly. What was her effective rate of return over the 25 years?

What amount compounded quarterly is equivalent to 7.2% compounded monthly?

Which interest rate would you prefer to earn on a three-year GIC: 6% compounded monthly, 6.1% compounded quarterly, 6.2% compounded semiannually, or 6.3% compounded annually?

An $1,100 investment earning 6.3% compounded annually grew to $4,483.92. What was the term of the investment?

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

A contract stipulated a payment of $8,500 plus 6.4% interest compounded monthly in 30 months. Prior to the due date, the contract was sold for $9,700 based on 3.8% interest compounded quarterly. How many months before maturity did the contract change hands?

Craig can buy a three-year compound-interest GIC paying 4.6% compounded semiannually or 4.5% compounded monthly. Which option should he choose? Present calculations that support your answer.

After two consecutive years of 10% rates of return, what rate of return in the third year will produce a cumulative gain of 30%?

What semiannually compounded rate is equivalent to 4% compounded monthly?

An investment earned 5.8% compounded monthly for 6 years, and then 3.8% compounded quarterly for another 4. Determine the annual rate of interest per year compounded annually.

Maxine found an old pay statement from nine years ago. Her hourly wage at the time was $13.50 versus her current wage of $20.80 per hour. At what equivalent (compound) annual rate has her wage grown over the period?

What rate of return in the second year of an investment is required to break even after a 50% loss in the first year?

Philippe contributed $4,300 to an RRSP eight years and six months ago. The money was invested in a Canadian Equity mutual fund. The investment is now worth $5537.82. Over the entire period, what monthly compounded nominal rate of return has the investment delivered?

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

An investment of $10,000 on January 1, 1970 grew to $300,000 on January 1, 2010. What average annually compounded rate of return was earned?

A credit union pays 5.25% compounded annually on five-year compound interest: GICs. It wants to set the rates on its semiannually and monthly compounded GICs of the same maturity so that investors will earn the same total interest. What should be the rates on the GICs with the higher compounding frequencies?

Enrolment at the local university increased 20% over a four-year period. Determine the average annual rate of enrolment during this time.

An investment earned 6% compounded semiannually for two years and 8% compounded annually for the next three years. What was the equivalent annually compounded rate of return for the entire five-year period?