Exam 9: Compound Interest: Further Topics and Applications

Last year, Kristina purchased a new condominium in downtown Toronto for $450,000 and used the property for rental income. During the past year, she rented the condo for $2200 per month. Property taxes were $4500 for the year, and there were no other expenses. The current appraised value of the property is the same as the purchase price. What is Kristina's income yield?

The Globe and Mail Web site noted that the shares of Compact Computers produced a 55% rate of total return in the past year. The shares paid a dividend of $0.72 per share during the year, and they currently trade at $37.50. What was the price of the shares 1 year ago?

The amount owed on a promissory note for $950 after two years and five months is $1082.11. What monthly compounded nominal rate of interest was charged on the debt?

Rounded to the nearest month, how long will it take a town's population to grow from 32,500 to 40,000 if the annual growth rate is 3%?

Norman is planning for his retirement. He initially deposits $25,000 in a retirement plan earning 4.4% compounded quarterly over 25 years. Three years later he begins another investment where he contributes $800 per quarter over 22 years. Based on monthly compounding, determine what the rate of interest will be on the final investment if he wishes to end up with $210,000.

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

No payments were made on a $3,400 loan during its three-year term. What was the annually compounded nominal interest rate on the loan if the amount owed at the end of the term was $4,297.91?

Many department stores charge 2.4% per month on overdue accounts. What is the effective annual rate in this situation?

A $9,000 payment on March 1 was not paid. Instead $9,140.65 was paid earning 6.3% interest compounded semi-annually. The payment was made on July 1.

Albert Greco paid $1,974 for a $10,000 strip bond 16 years before it reached maturity. What semi-annually compounded nominal rate will Albert earn on his investment?

For 5% compounded annually, calculate the equivalent nominal rate of interest compounded monthly.

What is the monthly compounded nominal rate that is equivalent to 7.8% compounded semi-annually?

When discounted to yield 9.5% compounded quarterly, a $4500 four-year promissory note bearing interest at 11.5% compounded semiannually was priced at $5697.84. How long after the issue date did the discounting take place?

A bank offers a rate of 5.0% compounded semiannually on its four-year GICs. What monthly compounded rate should the bank offer on four-year GIC's to make investors indifferent between the alternatives?

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

When discounted to yield 7.98% compounded monthly, a $2,600 three-year promissory note bearing interest at 9.25% compounded annually was priced at $3110.41. How long after the issue date did the discounting take place?

The Consumer Price Index (based on a value of 100 in 1986) rose from 67.2 in 1980 to 119.5 in 1990. What was the (equivalent) annual rate of inflation in the decade of the 1980s?

One year ago, Art Vandelay bought Norwood Industries shares for $37 per share. Today they are worth $40 per share. During the year, Art received dividends of $0.60 per share. What was his income yield, capital gain yield, and rate of total return for the year?

What monthly compounded nominal rate has an effective rate of 14.29%

If the Halifax Real Estate Board reports that house prices increased by 8% during the first seven months of the year, and if prices continue to rise at the same rate for the subsequent five months, what will be the (compound) increase for the entire year?