Exam 9: Compound Interest: Further Topics and Applications

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

A $20,000 face value strip bond is sold for $8,524 to yield 8.4% compounded semi-annually. Calculate the maturity date to the nearest day.

Assume that the TD Bank shares in Table 9.3 will pay a $2.54 per share dividend in 2013. What would the share price have needed to be at the end of 2013 for a total rate of return in 2013 of 7%?

A $100 investment purchased one year ago is now worth $110. It also earned $10 of income during the year. Determine the investment's: a. Income yield b. Capital gain yield c. Rate of total return

Maury invested $5,000 in a selection of high-tech stocks. After six years of careful trading, his investments were worth $79,700. At what quarterly compounded nominal rate did his investments grow?

For an investment to double in 5 years, the interest rate has to be 14.11% compounded quarterly.

What is the monthly compounded nominal rate that is equivalent to 19.56% compounded annually?

What is the time remaining until the maturity date of a $50,000 strip bond if it has just been purchased for $20,822.89 to yield 5.38% compounded semiannually until maturity?

The market value of Stephanie's bonds has declined from $1053.25 to $1021.75 per bond during the past year. In the meantime she has received two semiannual interest payments of $35. Calculate Stephanie's income yield, capital gain yield, and rate of total return for the year.

Consider the Province of Ontario strip bond in Table 9.1. a) Present calculations to verify, to the nearest dollar, the bond's price on July 4, 2013, based on the quoted yield of 4.01% compounded semiannually. b) What would the price be on July 4, 2020 if the bond's yield remains the same?

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

5.4% compounded monthly is a better investment than 5.18% compounded semi-annually

At the start of 1991, undergraduate students paid $190 per college course. By the end of 2010, the price per course had increased to $565. Determine the annual rate of increase.

Is it possible for a capital loss to be worse than -100%? Explain or give an example.

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?

What rate of return in the second year of an investment will wipe out a 50% gain in the first year?

Maxine found an old pay statement from nine years ago. Her hourly wage at the time was $13.50 versus her current wage of $20.80 per hour. At what equivalent (compound) annual rate has her wage grown over the period?

A $10,000 investment grew to $12,000 after 39 months of semiannual compounding. What effective rate of return did the investment earn?

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

A T-bill with 125 days remaining to maturity is discounted to yield 4.6% pa simple interest. What is the effective annualized rate of return on the T-bill?