Exam 9: Compound Interest: Further Topics and Applications

$100,000 face value strip bonds were sold at 24% of face value to yield 7.14% compounded monthly. Calculate the maturity date to the nearest day.

What is meant by the "total return" from an investment?

Calculate the effective annual rate for 9.4% compounded quarterly.

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

Calculate the effective annual rate for 14.4% compounded monthly.

What quarterly compounded interest rate is equivalent to 6% compounded: a. annually? b. semiannually? c. monthly?

What is the effective interest rate corresponding to a nominal annual rate of: a. 6% compounded semiannually? b. 6% compounded quarterly?

For three successive years, an investment paid annual rates of return of 3.5%, 4.8%, and 2.75%. Calculate the funds equivalent annually compounded rate of return over the three years.

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

How much will an investment of $100 be worth after 20 years if it increases in value by 25% in half of the years, but declines by 20% in the other years?

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

Banks usually quote residential mortgage interest rates on the basis of semiannual compounding. An independent mortgage broker is quoting rates with monthly compounding. What rate would the broker have to give to match 6.5% compounded semiannually available from a bank?

To the nearest day, how long will it take a $20,000 investment to grow to $22,000 (including the accrued interest) if it earns 7% compounded quarterly? Assume that a quarter-year has 91 days.

The Globe and Mail Web site noted that the shares of Compact Computers produced a 55% rate of total return in the past year. The shares paid a dividend of $0.72 per share during the year, and they currently trade at $37.50. What was the price of the shares 1 year ago?

Rounded to the nearest month, how long will it take money to lose 25% of its purchasing power if the annual rate of inflation is: a) 2% b) 4%

For 5% compounded annually, calculate the equivalent nominal rate of interest compounded monthly.

The maturity value of a $5,000 four-year compound- interest GIC was $5,839.72. What quarterly compounded rate of interest did it earn?

If a $5,000 investment grew to $6,450 in 30 months of monthly compounding, what effective rate of return was the investment earning?

Rounded to the nearest month, how long will it take an investment to double if it earns: a) 8.4% compounded annually? b) 10.5% compounded semiannually?

When he died in 1790, Benjamin Franklin left $4,600 to the city of Boston, with the stipulation that the money and its earnings could not be used for 100 years. The bequest grew to $332,000 by 1890. What equivalent compound annual rate of return did the bequest earn during the 100 year period?