Exam 9: Compound Interest: Further Topics and Applications

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%?

A $100,000 face value Treasury bill with 65 days remaining to maturity, was purchased to yield 4.5% per annum simple interest. What is the corresponding equivalent effective rate of return?

After two consecutive years of 7% rates of return, what rate of return in the third year will produce a cumulative gain of 25%?

Danielle's shares in the Industrial Growth Fund (an equity mutual fund) dropped in price from $12.86 to $12.56 over a three-month period. What were the simple and effective annualized rates of return during the period?

The union representing the Stanford Marketing Services employees negotiated a salary increase in each of the next three years of 3%, 2.5%, and 2.75%. If an employee earns $16.00 per hour now, how much will the employee earn per hour at the end of the contract?

A bank pays a simple interest rate of 8% per annum on 40-day GICs. What is the annualized rate of return?

What is the semi-annually compounded nominal rate that is equivalent to 10.5% compounded monthly?

What is the semi-annually compounded nominal rate that is equivalent to 16% compounded quarterly?

A department store credit card quotes a rate of 2% per month on any unpaid balance. Calculate the effective rate of interest being charged.

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

What rate of return in the second year of an investment will nullify a 25% return on investment in the first year?

What quarterly compounded rate is equivalent to 10.5% compounded monthly?

Camille can obtain a residential mortgage loan from a bank at 5.5% compounded semiannually, or from an independent mortgage broker at 5.4% compounded monthly. Which source should she pick if other terms and conditions of the loan are the same? Present calculations that support your answer.

A company reports that its sales have grown 3% per quarter for the last eight fiscal quarters. What annual growth rate has the company been experiencing for the last two years?

A $1,000 five-year compound-interest GIC matured at $1,234.01. What semiannually compounded rate of interest did it earn?

A mutual fund paid 5.5%, 9%, -8%, 3.5%, and 5% over the past five years. If you had invested $2,000 at the beginning of the five-year period, what was your investment worth at the end of the five-year period?

What effective rate of interest is equivalent to a nominal rate of 19.214% compounded monthly?

At 11.4% compounded quarterly, how long will it take for money to double?

The current (simple annualized) yield, based on the holding-period return for the most recent 7 days, is reported for a money market mutual fund as 6.17%. What is the fund's corresponding effective (annualized) yield?

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?