Question 1

What price should be paid for a $5000 face value strip bond with 19.5 years remaining to maturity if it is to yield the buyer 6.1% compounded semiannually?

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Question 2

A $25,000 loan at 9% compounded monthly is to be repaid by two equal payments due 1.5 years and 2.5 years after the date of the loan. What is the size of each payment?

Accepted Answer

A)  $11,939.97 
B)  $14,940.15 
C)  $15,015.33 
D)  $18,266.18 
E)  $22,855.95

Question 3

What was a $4400 investment worth after 6¾ years if it earned 5.4% compounded monthly?

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Question 4

A $10,000 eight-year investment earns interest at 12% compounded semiannually. If it is sold 30 months before maturity to yield 16% compounded quarterly, what is its selling price?

Accepted Answer

A)  $17,161.71 
B)  $6755.64 
C)  $10,719.15 
D)  $4219.55 
E)  $20,009.91

Question 5

What single amount, paid three years from now, would be economically equivalent to the combination of $1400 due today and $1800 due in five years if funds can be invested to earn 6% compounded quarterly?

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Question 6

The population of Ourtown, Saskatchewan is expected to grow at a rate of 2.5% per year for the next five years. If the current population is 11,763 what is it expected to be in five years?

Accepted Answer

A)  13,233 
B)  12,057 
C)  16,555 
D)  13,309 
E)  10,364

Question 7

Calculate the maturity value of a two-year, $20,000 Guaranteed Investment Certificate accumulating at 5% compounded semi-annually.

Accepted Answer

A)  $18,119 
B)  $20,000 
C)  $22,076 
D)  $23,612 
E)  $24,310

Question 8

Money is worth 5% compounded semi-annually. What is the value today of a contract that will bring in a payment of $86,500 in nine years?

Accepted Answer

A)  $63,276 
B)  $38,090 
C)  $55,461 
D)  $41,962 
E)  $55,759

Question 9

Fred borrowed money 18 months ago at 12% compounded semiannually. He now owes a total of $5450. How much of this is interest?

Accepted Answer

A)  $874.07 
B)  $893.71 
C)  $767.67 
D)  $3540.63 
E)  $1041.04

Question 10

On the same date that the CIBC advertised rates of 2%, 2.5%, 3%, 3.25%, and 7% in successive years of its five-year compound-interest Escalating Rate GIC, it offered 2.75% compounded annually on its five-year fixed-rate GIC. Calculate the interest earned in the fourth year from a $10,000 investment in each GIC.

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Question 11

Calculate the combined equivalent value of the scheduled payments on the indicated dates. The rate of return that money can earn is given in the fourth column. Assume that payments due in the past have not
 yet been made.

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Question 12

A payment of $1300 is scheduled for a date 3½ years from now. What would be an equivalent payment 9 months from now if money is worth 5.5% compounded quarterly?

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Question 13

What was the redemption value of a $300 face value compound-interest series S90 CSB on March 8, 2010?

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Question 14

From a simple inspection, it is possible for an investor to rank the four rates of return in each of parts (a) and (b)? If so, state the ranking. Give a brief explanation to justify your answer.
a) 9.0% compounded monthly, 9.1% compounded quarterly, 9.2% compounded semiannually, 9.3% compounded annually.
b) 9.0% compounded annually, 9.1% compounded semiannually, 9.2% compounded quarterly, 9.3% compounded monthly.

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Question 15

What is the maturity value of a $12,000 loan for 18 months at 7.2% compounded quarterly? How much interest is charged on the loan?

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Question 16

Mohinder has financial obligations of $1000 due in 3½ years and $2000 due in 5½ years. He wishes to settle the obligations sooner with a single payment one year from now. If money is worth 7.75% compounded semiannually, what amount should the payee be willing to accept?

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Question 17

Calculate the missing value:

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Question 18

A nine-year, $270,000 promissory note bears interest at a rate of 8% compounded annually. What is its maturity value?

Accepted Answer

A)  $441,889 
B)  $539,731 
C)  $299,057 
D)  $752,198 
E)  $135,067

Question 19

Calculate the maturity value:

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Question 20

An eight year note for $3800 with interest at 11% compounded semiannually was sold after three years and three months to yield the buyer 14% compounded quarterly. What price did the buyer pay?

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Exam 8: Compound Interest: Future Value and Present Value