Question 1

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

Accepted Answer

A)   $126,360
B)   $159,982
C)   $169,809
D)   $276,981
E)   $286,808 C

Question 2

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

Accepted Answer

a) 2 (compounded semiannually)
b) 12 (compounded monthly)
c) 4 (compounded quarterly)

Question 3

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?

Accepted Answer

$10,489.74

Question 4

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?

Accepted Answer

The answer of What amount did the owner of a...

Question 5

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

Accepted Answer

A)   $24,870
B)   $57,750
C)   $21,890
D)   $48,901
E)   $16,211

Question 6

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?

Accepted Answer

A)   $14,519
B)   $33,867
C)   $41,587
D)   $51,922
E)   $58077

Question 7

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?

Accepted Answer

The answer of Bjorn defaulted on payments of $2000 due...

Question 8

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

Accepted Answer

A)   $216.11
B)   $962.46
C)   $1,006.16
D)   $1,058.20
E)   $6,117.44

Question 9

Calculate the missing value:

Accepted Answer

The answer of Calculate the missing value: ...

Question 10

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

Accepted Answer

The answer of What amount today is economically equivalent to...

Question 11

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.

Accepted Answer

The answer of Use the data in Table 8.2 to...

Question 12

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

Accepted Answer

The answer of Explain the difference between "nominal rate of...

Question 13

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

Accepted Answer

The answer of What principal amount will have a maturity...

Question 14

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?

Accepted Answer

The answer of If money is worth 6% compounded annually,...

Question 15

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.

Accepted Answer

The answer of How much more will an investment of...

Question 16

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?

Accepted Answer

The answer of Donnelly Excavating has received two offers on...

Question 17

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

Accepted Answer

The answer of To what amount did $12,100 grow after...

Question 18

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

Accepted Answer

The answer of What amount, 1½ years from now, is...

Question 19

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?

Accepted Answer

The answer of Payments of $2300 due 18 months ago...

Question 20

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?

Accepted Answer

The answer of Follow the instructions in the second NET@assets...

Exam 8: Compound Interest: Future Value and Present Value