Exam 9: Compound Interest: Further Topics and Applications

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

What is the effective interest rate corresponding to a nominal annual rate of: a) 9% compounded semiannually? b) 9% compounded quarterly? c) 9% compounded monthly?

Calculate the effective annual rate for 19.2% compounded semi-annually.

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

A six-year, $20,000 GIC has a maturity value of $29,625. Calculate the semi-annually compounded nominal interest rate.

The maturity value of a $5000 four-year compound- interest GIC was $6147.82. What quarterly compounded rate of interest did it earn?

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

Consider the Province of Ontario strip bond in Table 9.1. a) Calculate the bond's market price on June 1, 2009 based on the quoted yield of 5.081% compounded semiannually. b) What would the price be on June 1, 2015 if the bond's yield remains the same?

-Calculate the missing quantities in Row

-Calculate the missing quantities in Row

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

-Calculate the missing quantities in Row

Searching a Mutual Fund Data Base Follow the instructions in the NET @ssets box earlier in this section to locate the "Mutual Funds" link in the student textbook's OLC. When the globefund. Com page loads, move your cursor over "GLOBE FUND" in the menu bar and select "Fund Selector" from the drop-down list. In the "Option C" area, you can enter the name of a particular fund. Enter "RBC Canadian Dividend" and click on "Go." The table that loads has several tabs along its top. Select "Long-term." This brings up another table with columns giving the fund's compound annual return for 3-year, 5-year, and 10-year periods ending on the last business day of the previous month. How much would $10,000 invested in this fund 10 years earlier be worth at the end of the previous month? Repeat for the "IA Group Dividends" and the "Trans IMS Canadian Growth" funds.

To the nearest month, how long will it take an investment to increase in value by 200% if it earns 7.5% compounded semiannually?

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

At the end of 2009, the Trans IMS Canadian Growth Fund had one of the worst 10-year compound annual returns of any Canadian diversified equity mutual fund. The fund's annual returns in successive years from 2000 to 2009 inclusive were -12.8%, -38.3%, -24.1%, 25.4%, 9.2%, 18.6%, 12.0%, -0.2%, - 38.5%, and 15.6%, respectively. For 3-year, 5-year, and 10-year periods ended December 31, 2009, what were the fund's equivalent annually compounded returns?

Camille can obtain a residential mortgage loan from a bank at 6.5% compounded semiannually, or from an independent mortgage broker at 6.4% compounded monthly. Which source should she pick if other terms and conditions of the loan are the same? Present calculations that support your answer.

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

Lisa is offered a loan from a bank at 7.2% compounded monthly. A credit union offers similar terms but a rate of 7.4% compounded semiannually. Which loan should she accept? Present calculations that support your answer.

Which scenario had the higher periodic rate of return: "$1 grew to $2" or "$3 grew to $5"? Both investments were for the same length of time at the same compounding frequency. Justify your choice.