Exam 8: Compound Interest: Future Value and Present Value

How much interest would be earned on a 10-year $117,000 Guaranteed Investment Certificate that grows at 9% compounded monthly?

For a nominal rate of 5.9%, determine the compounding frequency if the periodic interest rate is: a. 2.95%. b. c. 1.475%.

A four year $8000 promissory note bearing interest at 13.5% compounded monthly was discounted 21 months after issue to yield 12% compounded quarterly. What were the proceeds from the sale of the note?

What amount did the owner of a $5000 face value compound-interest series S96 Canada Savings Bond receive when she redeemed the bond on: a) November 1, 2009? b) August 21, 2010?

If you deposit $2,500 into an investment that grows at 13.2% compounded monthly, what will its value be in 17.5 years?

Murphy's annual income has increased by 10% per year for the last 8 years. If Murphy's annual income is now $72,596, what was it 8 years ago?

Bjorn defaulted on payments of $2000 due 3 years ago and $1000 due 1½ years ago. What would a fair settlement to the payee be 1½ years from now if the money could have been invested in low-risk government bonds to earn 4.2% compounded semiannually?

A 25-year, $10,000 strip bond was issued at a market rate of 9.4% compounded semi-annually. What was the issue price?

Calculate the missing value:

What amount today is economically equivalent to $8000 paid 18 months from now if money is worth 5% compounded monthly?

Use the data in Table 8.2 to determine the redemption value of a $500 face value compound-interest series S90 Canada Savings Bond on: a) November 1, 2009. b) April 15, 2010.

Explain the difference between "nominal rate of interest" and "periodic rate of interest."

What principal amount will have a maturity value of $5437.52 after 27 months if it earns 8.5% compounded quarterly?

If money is worth 6% compounded annually, what amount today is equivalent to $10,000 paid a. 12 years from now? b. 24 years from now? c. 36 years from now?

How much more will an investment of $10,000 be worth after 25 years if it earns 9% compounded annually instead of 8% compounded annually? Calculate the difference in dollars and as a percentage of the smaller maturity value.

Donnelly Excavating has received two offers on a used backhoe that Donnelly is advertising for sale. Offer 1 is for $10,000 down, $15,000 in six months, and $15,000 in 18 months. Offer 2 is for $8000 down plus two $17,500 payments one and two years from now. What is the economic value of each offer today if money is worth 10.25% compounded semiannually? Which offer should be accepted?

To what amount did $12,100 grow after 3¼ years if it earned 7.5% compounded monthly?

What amount, 1½ years from now, is equivalent to $7000 due in 8 years if money can earn 6.2% compounded semiannually?

Payments of $2300 due 18 months ago and $3100 due in three years are to be replaced by an equivalent stream of payments consisting of $2000 today and two equal payments due two and four years from now. If money can earn 9.75% compounded semiannually, what should be the amount of each of these two payments?

Follow the instructions in the second NET@assets box in Section 8.5 to locate the "Canada Savings Bonds" link in the textbook's OLC. After you bring up this Web page, find the link to a page that will provide interest rates for all outstanding issues of CSB's. Update Table 8.2 for the series 108(S108) CSB. If you own a $1000 face value S108 compound-interest CSB, for what amount could you redeem it at the beginning of next month?