Exam 9: Compound Interest: Further Topics and Applications

A $50,000 GIC will earn $70,000 of interest over its 10-year term. What is the monthly compounded nominal rate of interest?

-Calculate the missing quantities in Row N.

Philippe contributed $4300 to an RRSP eight years and six months ago. The money was invested in a Canadian Equity mutual fund. The investment is now worth $10,440.32. Over the entire period, what monthly compounded nominal rate of return has the investment delivered?

An investor's portfolio increased in value by 93% over a seven-year period in which the Consumer Price Index rose from 95.6 to 115.3. What was the compound annual real rate of return on the portfolio during the period?

In early 2009, the Templeton Growth Fund ran advertisements containing the message: $10,000 INVESTED IN TEMPLETON GROWTH FUND IN 1954 WOULD BE WORTH OVER $5.09 MILLION TODAY. What compound annual rate of return did the fund realize over this period (December 31, 1954 to December 31, 2009)?

To be equivalent to 10% compounded quarterly, what must be the nominal rate with: a. annual compounding? b. semiannual compounding? c. monthly compounding?

Calculate the term of the loan or investment:

Consider the Bell Canada strip bond maturing May 15, 2032, in Table 9.1. a) Calculate the bond's yield to four-figure accuracy on June 1, 2009 based on the quoted price of $26.40. b) What would the yield be one year later if the bond's price remains the same?

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

Under what circumstance does the value calculated for n equal the number of years in the term of the loan or investment?

According to Statistics Canada, undergraduate students paid an average of $4724 in tuition fees for the 2008/2009 academic year compared to fees of $1464 for the 1990/1991 year. During the same period, the Consumer Price Index rose from 78.5 to 115.80. a) What would have been the average tuition fees for the 2008/2009 year if tuition fees had grown just at the rate of inflation since the 1990/1991 year? b) What was the (equivalent) compound annual rate of increase of tuition fees during the period? c) What was the (equivalent) compound annual rate of inflation during the period?

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

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

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

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

Suppose the periodic rate for 6 months is 4%. Is the equivalent periodic rate for three months (pick one): (i) equal to ? (ii) less than 2%? (iii) greater than 2%? Answer the question without doing any calculations. Explain your choice.

Calculate the term of the loan or investment:

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

If the holding-period return on a money market mutual fund for the most recent seven days is 0.081%, what current (simple) yield and effective annualized yield will be quoted for the fund in the financial press?

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