# Quiz 9: Compound Interest: Further Topics and Applications

Business

Q 1Q 1

A six-year, $20,000 GIC has a maturity value of $29,625. Calculate the semi-annually compounded nominal interest rate.
A) 6.77%
B) 6.66%
C) 4.23%
D) 6.94%
E) 5.44%

Free

Multiple Choice

B

Q 2Q 2

A $50,000 GIC will earn $70,000 of interest over its 10-year term. What is the monthly compounded nominal rate of interest?
A) 7.32%
B) 9.15%
C) 3.37%
D) 8.79%
E) 3.42%

Free

Multiple Choice

C

Q 3Q 3

At what quarterly compounded nominal interest rate will money double in 75 months?
A) 11.25%
B) 15.06%
C) 3.77%
D) 28.11%
E) 11.73%

Free

Multiple Choice

A

Q 4Q 4

Albert Greco paid $1,974 for a $10,000 strip bond 16 years before it reached maturity. What semi-annually compounded nominal rate will Albert earn on his investment?
A) 11.78%
B) 3.17%
C) 5.22%
D) 10.67%
E) 10.40%

Free

Multiple Choice

Q 5Q 5

Seven years before it matures the value of a $1,000 strip bond is $672. What is the semi-annually compounded nominal interest rate?
A) 5.76%
B) 5.84%
C) 3.10%
D) 24.40%
E) 2.88%

Free

Multiple Choice

Q 6Q 6

At what annually compounded interest rate will an investment of $71,294.69 double in 90 months?
A) 6.97%
B) 7.23%
C) 9.68%
D) 9.28%
E) 10.55%

Free

Multiple Choice

Q 7Q 7

The Wilsons bought their home 16 years ago for $128,000. Its value now is $141,000. At what annual rate has the value of their home appreciated since they bought it?
A) 6.06%
B) 7.28%
C) 2.41%
D) 1.19%
E) 0.61%

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Multiple Choice

Q 8Q 8

Twenty years ago the population of a village in Newfoundland was 964. Now it is 612. At what average annual rate has the population of the village declined over the last 20 years?
A) 3.02%
B) 7.97%
C) 2.25%
D) 5.11 %
E) 1.77%

Free

Multiple Choice

Q 9Q 9

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?
A) 37.45%
B) 24.90%
C) 12.23%
D) 58.64%
E) 48.91%

Free

Multiple Choice

Q 10Q 10

A 30-year, $1,000 strip bond was traded for $167, four years after it was issued. What was the semi-annually compounded nominal rate at that time?
A) 7.13%
B) 7.00%
C) 25.07%
D) 12.52%
E) 7.27%

Free

Multiple Choice

Q 11Q 11

What amount invested at 10% compounded semiannually will be worth $6380.00 after 38 months?
A) $8690.00
B) $6331.04
C) $4684.05
D) $999.14
E) $3488.73

Free

Multiple Choice

Q 12Q 12

At 14% compounded annually, an investment of $50,000 will grow to $1,000,000 in 22.86 years. How much longer will it take at 11% compounded annually?
A) 8.33 years
B) 3.45 years
C) 5.85 years
D) 13.78 years
E) 28.71 years

Free

Multiple Choice

Q 13Q 13

At 11.4% compounded quarterly, how long will it take for money to double?
A) 2 years, 1 month
B) 5 years, 4 months
C) 5 years, 11 months
D) 6 years, 2 months
E) 7 years, 6 months

Free

Multiple Choice

Q 14Q 14

A demand loan for $8,000 with interest at 16% compounded quarterly was repaid after two years and eight months. What was the amount of interest paid?
A) $4138.26
B) $4155.67
C) $5265.03
D) $5236.19
E) $2763.81

Free

Multiple Choice

Q 15Q 15

What is the term of a compound-interest Guaranteed Investment Certificate if $8,500 invested at 6.1% compounded annually will earn interest totaling $4,365.50?
A) 11.25 years
B) 10.59 years
C) 8.50 years
D) 7.75 years
E) 7.00 years

Free

Multiple Choice

Q 16Q 16

A $50,000 strip bond was discounted to $21,680. The market rate was 7.4% compounded semi-annually. How much time was left before the bond reached maturity?
A) 11.5 years
B) 21.9 years
C) 11.7 years
D) 5.04 years
E) 23 years

Free

Multiple Choice

Q 17Q 17

Rounded to the nearest month, how long will it take for $25,000 to grow to $35,000 at 9% compounded quarterly?
A) 3 years, 8 months
B) 5 years, 1 month
C) 4 years, 4 months
D) 5 years, 6 months
E) 3 years, 1 month

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Multiple Choice

Q 18Q 18

Sollozo just made a single payment to repay a loan he had with the Corleone Finance Company. He paid a total of $86,500 which included interest of $56,500 at 48% compounded monthly. How long ago was the money borrowed?
A) 19 months
B) 63 months
C) 27 months
D) 34 months
E) 47 months

Free

Multiple Choice

Q 19Q 19

If the population of Green City is growing at a rate of 5% per year, how long will it take to grow from 2,300 to 10,000?
A) 17 years
B) 20 years
C) 23 years
D) 25 years
E) 30 years

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Multiple Choice

Q 20Q 20

If the population of Dodge City is decreasing at a rate of 19% per year, how long will it take to decrease from 7,700 to 2,000?
A) 7.75 years
B) 6.4 years
C) 9.6 years
D) 5.8 years
E) 4.9 years

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Multiple Choice

Q 21Q 21

An investment of $7,500 at 8% compounded monthly is now worth $13,280. How long ago was the investment made?
A) 12 years, 9 months
B) 11 years, 2 months
C) 9 years, 9 months
D) 8 years, 6 months
E) 7 years, 2 months

Free

Multiple Choice

Q 22Q 22

An investment of $10,000 on January 1, 1970 grew to $300,000 on January 1, 2010. What average annually compounded rate of return was earned?
A) 300%
B) 10.025%
C) 8.778%
D) 8.875%
E) 9.185%

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Multiple Choice

Q 23Q 23

A $25,000 strip bond is purchased for $8235 to yield 8% compounded semiannually. What is the remaining time until maturity?
A) 30.53 years
B) 12.50 years
C) 14.16 years
D) 22.28 years
E) 56.63 years

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Multiple Choice

Q 24Q 24

A $6300 face-value investment earning interest at 10% compounded annually for a six-year term was sold for $7550. How many years before its maturity date was the note sold if it was discounted to yield 12% compounded monthly?
A) 2.73
B) 3.27
C) 4.50
D) 12.38
E) 39.28

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Multiple Choice

Q 25Q 25

An investment had the following 4 year returns: -8%, 15%, 10% and -5%. Determine the average annual rate of return.
A) 2.54%
B) 3.61%
C) 3.85%
D) 4.03%
E) 4.92%

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Multiple Choice

Q 26Q 26

A five-year investment earned the following annual rates of return: 4.2%, 6.8%, 9.8% 12.1% and -11.6%. Determine the average annual rate of return.
A) 2.45%
B) 2.63%
C) 3.05%
D) 3.68%
E) 3.90%

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Multiple Choice

Q 27Q 27

Enrolment at the local university increased 20% over a four-year period. Determine the average annual rate of enrolment during this time.
A) 3.85%
B) 4.66%
C) 5.85%
D) 6.44%
E) 8.04%

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Multiple Choice

Q 28Q 28

Smoking among young adults has decreased by 34% over the past 16 years. Determine the average annual rate of decline.
A) -3.42%
B) -2.56%
C) -2.09%
D) -1.98%
E) -1.60%

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Multiple Choice

Q 29Q 29

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.
A) 4.8%
B) 5.1%
C) 5.6%
D) 6.6%
E) 7.2%

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Multiple Choice

Q 30Q 30

An investment earned 5.8% compounded monthly for 6 years, and then 3.8% compounded quarterly for another 4. Determine the annual rate of interest per year compounded annually.
A) 4.01
B) 4.11
C) 5.01
D) 5.11
E) 5.21

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Multiple Choice

Q 31Q 31

An investment earned 8% compounded quarterly for 10 years, and then 5.15% compounded semi-annually for another 15. Determine the annual rate of interest per year compounded monthly.
A) 7.38%
B) 7.16%
C) 6.84%
D) 6.42%
E) 5.85%

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Multiple Choice

Q 32Q 32

An investment earned 6.3% compounded annually for two years, 5.4% compounded semi-annually over another 2 years, and 4.5% compounded quarterly over the last 6 years. Determine the average annual rate of return over this 10 year period based on monthly compounding.
A) 4.75%
B) 4.98%
C) 5.01%
D) 5.05%
E) 5.15%

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Multiple Choice

Q 33Q 33

A 30-year, Government of Canada $10,000 strip bond was discounted at 4.9% compounded semi-annually and traded for $4,722. How many years earlier had the bond been issued?
A) 14.5 years
B) 15.0 years
C) 15.5 years
D) 29.0 years
E) 30.0 years

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Multiple Choice

Q 34Q 34

Martha is planning her retirement in 10 years' time. She contributes a lump sum deposit of $10,000 now in a plan earning 5.4% compounded semi-annually. Two years later, she will deposit $20,000 in another investment earning 4.8% compounded monthly. In the final 5 years, she plans on contributing $1,000 per month. Based on quarterly compounding, determine what the rate of interest will be on the final investment if she wishes to end up with $112,000.
A) 5.16%
B) 4.85%
C) 4.12%
D) 3.61%
E) 2.48%

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Multiple Choice

Q 35Q 35

Norman is planning for his retirement. He initially deposits $25,000 in a retirement plan earning 4.4% compounded quarterly over 25 years. Three years later he begins another investment where he contributes $800 per quarter over 22 years. Based on monthly compounding, determine what the rate of interest will be on the final investment if he wishes to end up with $210,000.
A) 5.37%
B) 5.48%
C) 5.59%
D) 5.72%
E) 5.85%

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Multiple Choice

Q 36Q 36

15 years ago, Alyssa made an initial deposit of $5,000 along with quarterly contributions in an investment earning 6.1% compounded monthly. 10 years ago, she deposited another lump sum of $25,000 in another investment. If her cumulative investments were $100,000 at the end of the 15 years, determine the rate of interest earned on the second investment based on annual compounding.
A) 4.05%
B) 4.15%
C) 4.30%
D) 4.55%
E) 5.05%

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Multiple Choice

Q 37Q 37

Anita contributes a lump sum of $50,000 and $350 per month in an investment earning 5.5% compounded monthly over a 10-year period. At the end of the 10th year, Anita plans to transfer her investment into another account where she can withdraw $4,000 per quarter for 10 years and still have $10,000 remaining. Based on quarterly compounding, determine what the rate of interest that will achieve this goal.
A) 2.39%
B) 2.89%
C) 3.39%
D) 4.39%
E) 4.89%

Free

Multiple Choice

Q 38Q 38

Jerome is planning on contributing $5,000 at the end of each semi-annual period for 8 years in an investment providing 8.4% compounded quarterly. At the end of this time, Jerome plans to reinvest this amount in another investment that will provide him with the opportunity to withdraw $1,500 per month over 5 years and have $10,000 remaining. Based on monthly compounding, determine what the rate of interest that will achieve this goal.
A) 3.77%
B) 4.07%
C) 4.37%
D) 4.77%
E) 5.07%

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Multiple Choice

Q 39Q 39

Manuel begins investing $700 per month for 4 years in an account earning 3.8% compounded annually. At the end of this time, he makes a $20,000 lump sum deposit on top of the accumulated investment into another account. At the end of 5 years, this amount has accumulated to $84,000. Based on monthly compounding, determine what the rate of interest that will achieve this goal.
A) 8.01%
B) 8.28%
C) 8.13%
D) 8.33%
E) 8.97%

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Multiple Choice

Q 40Q 40

Pat and Jaimie are twins. They will both invest $2,500 on their 20

^{th}birthday. Pat's money will accumulate at 14% compounded annually for 35 years until their 55^{th}birthday. Being less of a risk taker Jamie will select an investment that will provide a return of only 8.5% compounded annually. If when they reach age 055, Jamie decides to leave the money growing at 8.5% how many more years will it take for Jamie's investment to reach the value that Pat's will be at age 55? A) 9.3 years B) 21.2 years C) 14.3 years D) 27.4 years E) 18.4 yearsFree

Multiple Choice

Q 41Q 41

Pat and Jaimie are twins. Pat will invest $2,500 on their 20

^{th}birthday and the money will accumulate at 12% compounded annually until their 60^{th}birthday. Jamie will wait 10 more years, until they are 30 years old, and will then invest the same amount, $2,500. What annually compounded interest rate will Jamie need to achieve for the investment to catch up to Pat's when they are 60 years old? A) 18.93% B) 14.14% C) 14.89% D) 15.00% E) 16.31%Free

Multiple Choice

Q 42Q 42

Calculate the effective annual rate for 14.4% compounded monthly.
A) 15.4%
B) 12.8%
C) 16.4%
D) 13.8%
E) 17.1%

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Multiple Choice

Q 43Q 43

Calculate the effective annual rate for 9.4% compounded quarterly.
A) 13.14%
B) 12.88%
C) 10.58%
D) 9.74%
E) 9.98%

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Multiple Choice

Q 44Q 44

Calculate the effective annual rate for 19.2% compounded semi-annually.
A) 21.72%
B) 20.12%
C) 23.44%
D) 22.72%
E) 19.94%

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Multiple Choice

Q 45Q 45

Calculate the effective annual rate for 18% compounded annually.
A) 19.8%
B) 16.8%
C) 18.0%
D) 19.0%
E) 20.6%

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Multiple Choice

Q 46Q 46

Many department stores charge 2.4% per month on overdue accounts. What is the effective annual rate in this situation?
A) 26.8%
B) 32.9%
C) 25.6%
D) 31.8%
E) 28.8%

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Multiple Choice

Q 47Q 47

What monthly compounded nominal rate has an effective rate of 14.29%
A) 11.93%
B) 13.43%
C) 15.26%
D) 13.92%
E) 13.20%

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Multiple Choice

Q 48Q 48

At what monthly compounded nominal rate of interest will money triple in eight years?
A) 13.81%
B) 9.59%
C) 14.72%
D) 1.23%
E) 115.10%

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Multiple Choice

Q 49Q 49

For a five-year GIC investment, what monthly compounded nominal rate would put you in the same financial position as 8% compounded semiannually?
A) 8.02%
B) 8.16%
C) 7.84%
D) 8.21%
E) 7.87%

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Multiple Choice

Q 50Q 50

Determine the equivalent nominal rate of interest compounded monthly, as 8.4% compounded quarterly.
A) 8.34%
B) 8.67%
C) 9.04%
D) 9.16%
E) 9.34%

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Multiple Choice

Q 51Q 51

Determine the equivalent nominal rate of interest compounded semi-annually, as 4.2% compounded monthly.
A) 4.20%
B) 4.24%
C) 4.28%
D) 4.36%
E) 4.44%

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Multiple Choice

Q 52Q 52

Determine the rate at which money will quadruple in 20 years if interest is compounded monthly.
A) 6.05%
B) 6.35%
C) 6.65%
D) 6.95%
E) 7.05%

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Multiple Choice

Q 53Q 53

An invoice indicates that interest at the rate of 1.75% per month will be charged on overdue amounts. What effective rate of interest is being charged?
A) 19.21%
B) 23.14%
C) 24.75%
D) 26.67%
E) 21.00%

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Multiple Choice

Q 54Q 54

Find the monthly compounded nominal interest rate that is equivalent to an effective rate of 21%.
A) 1.75%
B) 23.144%
C) 1.929%
D) 19.214%
E) 1.601%

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Multiple Choice

Q 55Q 55

Calculate the effective annual rate, if $100 grew to $165 in 11.5 years with quarterly compounding.
A) 10.94%
B) 4.38%
C) 7.87%
D) 7.22%
E) 4.45%

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Multiple Choice

Q 56Q 56

On overdue accounts the telephone company charges 1.25% per month. What is the effective annual rate?
A) 17.92%
B) 17.55%
C) 16.33%
D) 16.08%
E) 15.00%

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Multiple Choice

Q 57Q 57

Over six years Craig earned interest of $8,400 on an investment of $20,000. What effective rate of return did he earn?
A) 15.56%
B) 6.02%
C) 7.00%
D) 11.53%
E) 14.71%

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Multiple Choice

Q 58Q 58

Over nine years Craig earned interest of $29,700 on an investment of $16,000. What effective rate of return did he earn?
A) 7.11%
B) 9.44%
C) 10.92%
D) 12.37%
E) 13.56%

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Multiple Choice

Q 59Q 59

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.
A) 11 years and 110 days
B) 10 years and 110 years
C) 10 years and 133 days
D) 9 years and 110 days
E) 9 years and 133 days

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Multiple Choice

Q 60Q 60

$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.
A) 21 years and 15 days
B) 20 years and 250 days
C) 20 years and 17 days
D) 19 years and 64 days
E) 19 years and 1 day

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Multiple Choice

Q 61Q 61

Determine how long will take to triple money given an interest rate of 4.39% compounded monthly. Calculate to the nearest day.
A) 25 years and 26 days
B) 24 years and 46 days
C) 23 years and 60 days
D) 22 years and 90 days
E) 20 years and 60 days

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Multiple Choice

Q 62Q 62

A contract stipulated a payment of $8,500 plus 6.4% interest compounded monthly in 30 months. Prior to the due date, the contract was sold for $9,700 based on 3.8% interest compounded quarterly. How many months before maturity did the contract change hands?
A) 9 months and 22 days
B) 8 months and 22 days
C) 7 months and 22 days
D) 6 months and 22 days
E) 5 months and 22 days

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Multiple Choice

Q 63Q 63

The proceeds of a $9,000 8-year promissory note earning 5% compounded semi-annually were $10,474. How many years before maturity date was the note sold if the discounted rate was 7.2% compounded annually.
A) 3.5 years
B) 4.5 years
C) 5.5 years
D) 6.5 years
E) 7.5 years

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Multiple Choice

Q 64Q 64

Rounded to the nearest month, calculate how long it will take money to lose half its purchasing power to a 3.25% inflation rate.
A) 20 years and 10 months
B) 21 years and 8 months
C) 21 years and 10 months
D) 22 years and 4 months
E) 22 years and 8 months.

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Multiple Choice

Q 65Q 65

Bobby invested $1,000 for five years. For the first two years he earned 9% compounded monthly. For the next two years he earned 11% compounded quarterly. For the final year he earned 14% compounded semi-annually. What was his effective rate of return over the five years?
A) 14.49%
B) 11.22%
C) 10.80%
D) 13.38%
E) 13.99%

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Multiple Choice

Q 66Q 66

Carlita invested $10,000 for 25 years. For the first 15 years she earned 15% compounded semi-annually. For the last 10 years she earned 9.6% compounded monthly. What was her effective rate of return over the 25 years?
A) 13.32%
B) 10.03%
C) 15.56%
D) 12.30%
E) 14.51%

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Multiple Choice

Q 67Q 67

Lansky Finance Company was charging 1.87% per month on overdue accounts but negative publicity and public pressure made them decide to reduce the rate. What monthly finance charge would result in an annual effective rate of 19.99%?
A) 1.80%
B) 1.67%
C) 1.53%
D) 1.42%
E) 1.37%

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Multiple Choice

Q 68Q 68

Rounded to the nearest month, calculate how long it will take for $1,000 to decline to $643.68 due to a 5.2% inflation rate.
A) 9 years and 6 months
B) 9 years and 3 months
C) 8 years and 9 months
D) 8 years and 6 months
E) 8 years and 3 months

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Multiple Choice

Q 69Q 69

Determine the annual nominal rate of a credit card charging 2.3% effective rate based on monthly compounding.
A) 24.62%
B) 25.52%
C) 26.42%
D) 27.32%
E) 28.22%

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Multiple Choice

Q 70Q 70

Determine the annual effective rate of a credit card offering 1.3% monthly.
A) 16.77%
B) 16.47%
C) 16.07%
D) 15.77%
E) 15.47%

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Multiple Choice

Q 71Q 71

A credit card company wishes to reduce its effective interest rate by 4%. It currently charges a periodic rate of 1.75% per month. Determine by what amount the company should it set its new monthly periodic rate.
A) 1.17%
B) 1.27%
C) 1.37%
D) 1.47%
E) 1.57%

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Multiple Choice

Q 72Q 72

What amount compounded quarterly is equivalent to 7.2% compounded monthly?
A) 7.64%
B) 7.54%
C) 7.44%
D) 7.34%
E) 7.24%

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Multiple Choice

Q 73Q 73

What effective rate of interest is equivalent to a nominal rate of 19.214% compounded monthly?
A) 1.210%
B) 21.000%
C) 14.530%
D) 22.000%
E) 17.704%

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Multiple Choice

Q 74Q 74

What amount compounded monthly is equivalent to 6.75% compounded semi-annually?
A) 5.66%
B) 6.16%
C) 6.36%
D) 6.66%
E) 7.06 %

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Multiple Choice

Q 75Q 75

What is the monthly compounded nominal rate that is equivalent to 7.8% compounded semi-annually?
A) 6.40%
B) 7.68%
C) 8.12%
D) 3.90%
E) 5.88%

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Multiple Choice

Q 76Q 76

What is the semi-annually compounded nominal rate that is equivalent to 10.5% compounded monthly?
A) 11.02%
B) 8.75%
C) 5.37%
D) 10.73%
E) 11.44%

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Multiple Choice

Q 77Q 77

What is the semi-annually compounded nominal rate that is equivalent to 16% compounded quarterly?
A) 9.91%
B) 17.44%
C) 15.02%
D) 16.32%
E) 16.98%

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Multiple Choice

Q 78Q 78

What is the quarterly compounded nominal rate that is equivalent to 18% compounded monthly?
A) 18.53%
B) 17.84%
C) 16.89%
D) 18.64%
E) 18.27%

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Multiple Choice

Q 79Q 79

What is the monthly compounded nominal rate that is equivalent to 19.56% compounded annually?
A) 18.00%
B) 15.00%
C) 21.41%
D) 19.06%
E) 18.32%

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Multiple Choice

Q 80Q 80

A bank pays a simple interest rate of 8% per annum on 40-day GICs. What is the annualized rate of return?
A) 8.00%
B) 8.29%
C) 8.77%
D) 9.13%
E) 8.53%

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Multiple Choice

Q 81Q 81

Patty Lo purchased a house that she planned to use as a rental property for $300,000. During the past year, she rented the house for $1750 per month. Property taxes were $3900 for the year, and other expenses were $450 for a new garage door opener and $650 for lawn care. The current appraised value of the property is $315,000. What is Patty Lo's income yield?
A) 7%
B) 5.7%
C) 5.6%
D) 5.3%
E) 6.6%

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Multiple Choice

Q 82Q 82

Patty Lo purchased a house that she planned to use as a rental property for $300,000. During the past year, she rented the house for $1750 per month. Property taxes were $3900 for the year, and other expenses were $450 for a new garage door opener and $650 for lawn care. The current appraised value of the property is $315,000. What is Patty Lo's capital gain yield?
A) 4.8%
B) 4.7%
C) 5.3%
D) 5.6%
E) 5%

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Multiple Choice

Q 83Q 83

Patty Lo purchased a house that she planned to use as a rental property for $300,000. During the past year, she rented the house for $1750 per month. Property taxes were $3900 for the year, and other expenses were $450 for a new garage door opener and $650 for lawn care. The current appraised value of the property is $315,000. What is Patty Lo's rate of total return?
A) 10.3%
B) 11.8%
C) 10.9%
D) 11.6%
E) 11.0%

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Multiple Choice

Q 84Q 84

Patty Lo purchased a house that she planned to use as a rental property for $300,000. During the past year, she rented the house for $1750 per month. Property taxes were $3900 for the year, and other expenses were $450 for a new garage door opener and $650 for lawn care. The current appraised value of the property is $315,000. What is Patty Lo's total return?
A) $15,000
B) $31,000
C) $16,000
D) $21,000
E) $17,100

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Multiple Choice

Q 85Q 85

Last year, Kristina purchased a new condominium in downtown Toronto for $450,000 and used the property for rental income. During the past year, she rented the condo for $2200 per month. Property taxes were $4500 for the year, and there were no other expenses. The current appraised value of the property is the same as the purchase price. What is Kristina's income yield?
A) 5.9%
B) 6.3%
C) 4.9%
D) 5.25%
E) 4.75%

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Multiple Choice

Q 86Q 86

Last year, Kristina purchased a new condominium in downtown Toronto for $450,000 and used the property for rental income. During the past year, she rented the condo for $2200 per month. Property taxes were $4500 for the year, and there were no other expenses. The current appraised value of the property is the same as the purchase price. What is Kristina's rate of total return?
A) 5.9%
B) 6.3%
C) 4.75%
D) 4.9%
E) 5.5%

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Multiple Choice

Q 87Q 87

A mutual fund paid 3.5%, 4%, 3.5%, 6%, and 5% over the past five years. If you had invested $1,000 at the beginning of the five-year period, what was your investment worth at the end of the five-year period?
A) $1220.00
B) $1617.34
C) $1771.38
D) $1239.96
E) $1180.92

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Multiple Choice

Q 88Q 88

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?
A) $2300.00
B) $2699.37
C) $2570.83
D) $2608.09
E) $2299.46

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Multiple Choice

Q 89Q 89

A stock valued at $150 increased by 25% and then decreased by 25%. What was the value of the stock after the decrease?
A) $140.63
B) $150.00
C) $187.50
D) $112.50
E) $125.00

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Multiple Choice

Q 90Q 90

A stock valued at $75 decreased by 20% and then increased by 20%. What was the value of the stock after the increase?
A) $75
B) $72
C) $60
D) $90
E) $80

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Multiple Choice

Q 91Q 91

The insurance premium on a building is 0.05% of the face value. The face value is 75% of the building's market value. The insurance premium is $1650. What is the face value of the policy?
A) $2,475,000
B) $33,000
C) $3,300,000
D) $4,400,000
E) $44,000

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Multiple Choice

Q 92Q 92

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

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True False

Q 93Q 93

The population of Canada grew from 24,820,000 at the start 1981 to 33,740,000 at the end of 2009. The annual rate of growth over 29 years was 1.06%

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True False

Q 94Q 94

The average Canadian home was $70,000 in the early 80s. In 30 years, the average increased to $390,000. The average increase is 5.89%

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True False

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True False

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True False

Q 97Q 97

An effective rate of 6.6% (based on quarterly compounding) has a higher nominal rate than an effective rate of 6.5% (based on monthly compounding).

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True False

Q 98Q 98

A $10,000 payment on March 15

^{th}was not paid. Instead $10,158.63 was paid earning 6.4% interest compounded monthly. The payment was made on June 13.Free

True False

Free

True False

Q 100Q 100

A portfolio earned annual rates of 18%, 25%, -5%, -5%, and 12% in five successive years. The portfolio's equivalent annual compounded rate of return is 20%.

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True False

Q 101Q 101

A $45,000 payment on August 11

^{th}was not paid. Instead $46,306.41 was paid earning 8.8% interest compounded quarterly. The payment was made on Dec 20.Free

True False

Q 102Q 102

A $9,000 payment on March 1 was not paid. Instead $9,140.65 was paid earning 6.3% interest compounded semi-annually. The payment was made on July 1.

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True False

Q 103Q 103

An original loan of $6,500 has accumulated to $10,093.14 based on 9.2% interest compounded annually. The loan is five years old.

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True False

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True False

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True False

Q 106Q 106

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?

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Short Answer

Q 107Q 107

What was the annually compounded nominal rate of growth if the future value of $1,000 after 20 years was $2321.06?

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Short Answer

Q 108Q 108

An initial $1,800 investment was worth $2120.31 after two years and nine months.
What quarterly compounded nominal rate of return did the investment earn?

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Short Answer

Q 109Q 109

A strip bond that will mature 7½ years from now at its $13,000 face value can be purchased today for $9,042. What rate of return (compounded semiannually) will this strip bond provide to an investor?

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Short Answer

Q 110Q 110

Mr. and Mrs. Markovich note that the home they purchased 20 years ago for $70,000 is now appraised at $340,000. What was the (equivalent) annual rate of appreciation in the value of their home during the 20-year period?

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Short Answer

Q 111Q 111

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

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Short Answer

Q 112Q 112

The amount owed on a promissory note for $950 after two years and five months is $1082.11. What monthly compounded nominal rate of interest was charged on the debt?

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Short Answer

Q 113Q 113

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?

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Q 114Q 114

Three years ago Mikhail invested $7,000 in a three-year compound interest GIC. He has just received its maturity value of $7,867.34. What was the monthly compounded rate of interest on the GIC?

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Short Answer

Q 115Q 115

Philippe contributed $4,300 to an RRSP eight years and six months ago. The money was invested in a Canadian Equity mutual fund. The investment is now worth $5537.82. Over the entire period, what monthly compounded nominal rate of return has the investment delivered?

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Short Answer

Q 116Q 116

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?

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Short Answer

Q 117Q 117

An $1,100 investment earning 6.3% compounded annually grew to $4,483.92. What was the term of the investment?

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Short Answer

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Short Answer

Q 119Q 119

How long before a future payment of $1,000 would a payment of just $100 be an economically equivalent alternative? Round your answer to the nearest month. Assume money can earn 4.8% compounded semiannually.

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Q 120Q 120

$5,000 invested in a GIC earning 3.7% compounded semiannually earned interest of $789.73.What was the term of the GIC?

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Short Answer

Q 121Q 121

The current balance on a loan is $3319.59. If the interest rate on the loan is 5% compounded monthly, how long ago was the $2,870 loan made?

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Short Answer

Q 122Q 122

Marilyn was supposed to pay $1,450 to Bernice on March 1. Some time later Marilyn paid Bernice an equivalent payment of $1,528.01, allowing for a time value of money of 4.5% compounded monthly. When did Marilyn make the payment?

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Short Answer

Q 123Q 123

What is the remaining time until the maturity date of a $10,000 strip bond if it is purchased for $4,011.33 to yield 6.4% compounded semiannually until maturity?

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Short Answer

Q 124Q 124

A few years ago Avtar invested $6,000 in a compound-interest GIC that earned 4.5% compounded semiannually. He recently received the maturity value of $7,168.99. What was the term of the GIC?

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Short Answer

Q 125Q 125

In early 2013, the Templeton Growth Fund ran advertisements containing the message:
$10,000 INVESTED IN TEMPLETON GROWTH FUND IN 1954 WOULD BE WORTH OVER $9.09 MILLION TODAY.
What compound annual rate of return did the fund realize over this period (December 31, 1954 to December 31, 2012)?

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Short Answer

Q 126Q 126

Anders discovered an old pay statement from 11 years ago. His monthly salary at the time was $2,550 versus his current salary of $4,475 per month. At what (equivalent) compound annual rate has his salary grown during the period?

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Short Answer

Q 127Q 127

The population of Canada grew from 24,343,000 in 1981 to 34,880,500 in 2012. What was the overall compound annual rate of growth in our population during the period?

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Short Answer

Q 128Q 128

The Consumer Price Index (based on a value of 100 in 1992) rose from 93.3 in 1990 to 113.5 in 2000. What was the (equivalent) annual rate of inflation in the decade of the 1990s?

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Short Answer

Q 129Q 129

A four-year promissory note for $3,800 plus interest at 4.5% compounded semiannually was sold 18 months before maturity for $4093. What quarterly compounded (annual) rate of return will the buyer realize on her investment?

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Short Answer

Q 130Q 130

An investor's portfolio increased in value from $100,000 to $193,000 over a seven-year period in which the Consumer Price Index rose from 95.6 to 115.3. What was the compound annual real rate of return on the portfolio during the period?

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Short Answer

Q 131Q 131

A portfolio earned 20%, -20%, 0%, 20%, and -20% in five successive years. What was the portfolio's five-year equivalent annually compounded rate of return?

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Short Answer

Q 132Q 132

A portfolio earned 20%, 15%, -10%, 25%, and -5% in five successive years. What was the portfolio's five-year equivalent annually compounded rate of return?

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Short Answer

Q 133Q 133

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%?

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Short Answer

Q 134Q 134

When discounted to yield 7.98% compounded monthly, a $2,600 three-year promissory note bearing interest at 9.25% compounded annually was priced at $3110.41. How long after the issue date did the discounting take place?

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Short Answer

Q 135Q 135

A $4,000 loan at 4.8% compounded monthly was settled by a single payment of $5,000 including accrued interest. Rounded to the nearest day, how long after the initial loan was the $5,000 payment made? For the purpose of determining the number of days in a partial month, assume that a full month has 30 days.

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Short Answer

Q 136Q 136

Wilf paid $557.05 for a $1,000 face value strip bond. At this price the investment will yield a return of 5.22% compounded semiannually. How long (to the nearest day) before its maturity date did Wilf purchase the bond? Assume that each half-year has exactly 182 days.

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Short Answer

Q 137Q 137

A $5,000 face value strip bond may be purchased today for $1073.36 yielding the purchaser 7.27% compounded semiannually. How much time (to the nearest day) remains until the maturity date? Assume that each half-year has exactly 182 days.

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Short Answer

Q 138Q 138

A $10,000 face value strip bond was purchased for $4188.77. At this price, the bond provided a return of 5.938% compounded semiannually until the maturity date. To the nearest day, how long before the maturity date was the bond purchased? Assume that each half year is exactly 182 days long.

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Essay

Q 139Q 139

A $5000 strip bond was purchased for $3054.29, providing the investor with a return of 3.9% compounded semiannually until the maturity date. To the nearest day, how long before the maturity date was the bond purchased?

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Essay

Q 140Q 140

$7,500 was borrowed for a four-year term at 9% compounded quarterly. The terms of the loan allow prepayment of the loan based on discounting the loan's maturity value at 7% compounded quarterly. How long (to the nearest day) before the maturity date was the loan prepaid if the payout amount was $9,380.24? For the purpose of determining the number of days in a partial calendar quarter, assume that a full quarter has 91 days.

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Q 141Q 141

The proceeds from the sale of a $4,500 five-year promissory note bearing interest at 5% compounded quarterly were $5277.81. How long before its maturity date was the note sold if it was discounted to yield 6.3% compounded monthly?

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Short Answer

Q 142Q 142

Which of the flowing nominal interest rates has the highest effective rate: 12% compounded annually, 11.9% compounded semiannually, 11.8% compounded quarterly, or 11.7% compounded monthly?

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Short Answer

Q 143Q 143

Which interest rate would you prefer to earn on a three-year GIC: 6% compounded monthly, 6.1% compounded quarterly, 6.2% compounded semiannually, or 6.3% compounded annually?

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Short Answer

Q 144Q 144

Which interest rate would you prefer to pay on a loan: 9% compounded monthly, 9.1% compounded quarterly, 9.2% compounded semiannually, or 9.3% compounded annually?

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Short Answer

Q 145Q 145

Is the effective rate of interest ever numerically smaller than the nominal interest rate?

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Short Answer

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Essay

Q 147Q 147

A semiannually compounded nominal rate and a monthly compounded nominal rate have the same effective rate. Which has the larger nominal rate? Explain.

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Essay

Q 148Q 148

From a lender's point of view, would you rather disclose to borrowers the nominal interest rate or the effective interest rate?

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Essay

Q 149Q 149

What is the effective rate of interest on a credit card that calculates interest at the rate of 1.8% per month?

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Short Answer

Q 150Q 150

If an invoice indicates that interest at the rate of 2% per month will be charged on overdue amounts, what effective rate of interest will be charged?

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Short Answer

Q 151Q 151

If the nominal rate of interest paid on a savings account is 2% compounded monthly, what is the effective rate of interest?

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Q 152Q 152

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?

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Short Answer

Q 153Q 153

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

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Q 154Q 154

After 27 months of quarterly compounding, a $3,000 debt had grown to $3,810. What effective rate of interest was being charged on the debt?

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Short Answer

Q 155Q 155

Lisa is offered a loan from a bank at 4.2% compounded monthly. A credit union offers similar terms but a rate of 4.4% compounded semiannually. Which loan should she accept? Present calculations that support your answer.

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Short Answer

Q 156Q 156

Craig can buy a three-year compound-interest GIC paying 4.6% compounded semiannually or 4.5% compounded monthly. Which option should he choose? Present calculations that support your answer.

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Short Answer

Q 157Q 157

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.

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Short Answer

Q 158Q 158

ABC Ltd. reports that its sales are growing at the rate of 1.3% per month. DEF Inc. reports sales increasing by 4% each quarter. What is each company's effective annual rate of sales growth?

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Q 159Q 159

Columbia Trust wants its annually, semiannually, and monthly compounded five-year GICs all to have an effective interest rate of 3.75%. What nominal annual rates should it quote for the three compounding options?

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Essay

Q 160Q 160

Belleville Credit Union has established interest rates on its three-year GICs so that the effective rate of interest is 4% on all three compounding options. What are the monthly, semiannually, and annually compounded rates?

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Essay

Q 161Q 161

A department store chain currently charges 18% compounded monthly on its credit card. To what amount should it set the monthly compounded annual rate if it wants to add 2% to the effective interest rate?

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Q 162Q 162

An oil company wants to drop the effective rate of interest on its credit card by 3%. If it currently charges a periodic rate of 1.7% per month, at what amount should it set the periodic rate?

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Essay

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Q 168Q 168

For a three-year GIC investment, what nominal rate compounded monthly would put you in the same financial position as 5.5% compounded semiannually?

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Q 169Q 169

A trust company pays 3.5% compounded semiannually on its three-year GICs. For you to prefer an annually compounded GIC of the same maturity, what value must its nominal interest rate exceed?

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Q 170Q 170

You are offered a loan at a rate of 9% compounded monthly. Below what nominal rate of interest would you choose semiannual compounding instead?

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Q 171Q 171

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?

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Q 172Q 172

A credit union pays 5.25% compounded annually on five-year compound interest: GICs. It wants to set the rates on its semiannually and monthly compounded GICs of the same maturity so that investors will earn the same total interest. What should be the rates on the GICs with the higher compounding frequencies?

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Q 173Q 173

A bank offers a rate of 5.0% compounded semiannually on its four-year GICs. What monthly compounded rate should the bank offer on four-year GIC's to make investors indifferent between the alternatives?

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Q 174Q 174

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?

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Short Answer

Q 175Q 175

If a company's annual sales grew from $165,000 to $485,000 in a period of eight years, what has been the compound annual rate of growth of sales during the period?

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Short Answer

Q 176Q 176

If the Consumer Price Index rose from 109.6 to 133.8 over an 8½-year period, what was the equivalent compound annual inflation rate during the period?

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Q 177Q 177

To the nearest month, how long will it take an investment to double in value if it earns 7.5% compounded semiannually?

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Q 178Q 178

An investor paid $4217.17 to purchase a $10,000 face value strip bond for her RRSP. At this price the investment will provide a return of 6.47% compounded semiannually. How long (to the nearest day) after the date of purchase will the bond mature? Assume that each half-year is exactly 182 days long.

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Short Answer

Q 179Q 179

Terry was supposed to pay $800 to Becky on March 1. At a later date, Terry paid Becky an equivalent payment in the amount of $895.67. If they provided for a time value of money of 8% compounded monthly, when did Terry make the payment?

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Short Answer

Q 180Q 180

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.

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Short Answer

Q 181Q 181

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?

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Q 182Q 182

Rounded to the nearest month, how long will it take money to lose one-third of its purchasing power if the annual inflation rate is 3%?

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Q 183Q 183

An investor's portfolio increased in value by 53% over a five-year period while the Consumer Price Index rose from 121.6 to 135.3. What was the portfolio's annually compounded real rate of return?

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Q 184Q 184

When discounted to yield 9.5% compounded quarterly, a $4500 four-year promissory note bearing interest at 11.5% compounded semiannually was priced at $5697.84. How long after the issue date did the discounting take place?

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Q 185Q 185

The population of a mining town declined from 17,500 to 14,500 in a five-year period. If the population continues to decrease at the same compound annual rate, how long, to the nearest month, will it take for the population to drop by another 3,000?

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Q 186Q 186

If an interest rate of 6.9% compounded semiannually is charged on a car loan, what effective rate of interest should be disclosed to the borrower?

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Q 187Q 187

Which of the following rates would you prefer for a loan: 7.6% compounded quarterly, 7.5% compounded monthly, or 7.7% compounded semiannually?

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Q 188Q 188

If an invoice indicates that interest at the rate of 1.2% per month will be charged on overdue amounts, what effective rate of interest will be charged?

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Q 189Q 189

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

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Q 190Q 190

Camille can obtain a residential mortgage loan from a bank at 8.75% compounded semiannually or from an independent mortgage broker at 8.6% compounded monthly. Which source should she pick if other terms and conditions of the loan are the same? Present calculations that support your answer.

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Q 191Q 191

If a $15,000 investment grew to $21,805 in 4½ years of quarterly compounding, what effective rate of return was the investment earning?

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Q 192Q 192

What monthly compounded nominal rate would put you in the same financial position as 5.5% compounded semiannually?

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Q 193Q 193

You are offered a loan at a rate of 9% compounded monthly. What would a semiannually compounded nominal rate would a competing bank need to offer in order to provide an equivalent rate?

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Q 194Q 194

A bank offers a rate of 5.3% compounded semiannually on its four-year GICs. What monthly and annually compounded rates should it quote in order to have the same effective interest rate at all three nominal rates?

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Q 195Q 195

A trust company pays 5.375% compounded annually on its 5-year GICs. What semiannually compounded nominal interest rate would provide the same maturity value?

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Q 196Q 196

The Consumer Price Index rose from 131.2 to 132.1 during the second quarter of a year. What was the effective annualized rate of inflation during the quarter?

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Q 197Q 197

The Calgary Real Estate Board reports that house prices increased by 5% during the first seven months of the year. If prices continue to rise at the same rate for the subsequent five months, what will be the (compound) increase for the entire year?

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Q 198Q 198

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?

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Q 199Q 199

The current (simple annualized) yield on a money market mutual fund, based on the return for the most recent seven days, is 4.12%. What effective (annualized) yield will be reported for the fund?

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Q 200Q 200

The current (simple annualized) yield, based on the holding-period return for the most recent seven days, is reported for a money market mutual fund as 4.54%. What is the fund's corresponding effective (annualized) yield?

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Q 205Q 205

Does the combined effect of a 20% increase followed by a 20% decrease differ from the combined effect of a 20% decrease followed by a 20% increase? Justify your answer.

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Q 206Q 206

Rose purchased units of the Trimark Fund 1 year ago at $24.10 per unit. Today they are valued at $25.50. On the intervening December 31, there was a distribution of $0.83 per unit. ("Distribution" is the term used by most mutual funds for income paid to unit holders.) Calculate Rose's income yield, capital gain yield, and rate of total return for the year.

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Q 207Q 207

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.

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Q 208Q 208

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?

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Q 209Q 209

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?

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Q 210Q 210

The federal government cut transfer payments to the provinces by a total of 20% over a five-year period. In the next budget speech, the Minister of Finance announced "the level of transfer payments will be restored to their former level by a 20% increase to be phased in over the next two years." Is this an accurate statement? Explain briefly.

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Q 211Q 211

The price of Bionex Inc. shares rose by 25% in each of 2 successive years. If they began the 2-year period at $12 per share, what was the percent increase in price over the entire 2 years?

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Q 212Q 212

The price of Biomed Corp. shares began a two-year period at $12, but fell 25% in each year. What was their overall percent decline in price?

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Q 213Q 213

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

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Q 214Q 214

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

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Q 215Q 215

What rate of return in the second year of an investment is required to break even after a 50% loss in the first year?

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Q 216Q 216

Vitaly's shares of Dominion Petroleum have dropped in value from $36.75 to $32.25 during the past year. The shares paid a $0.50 per share dividend 6 months ago. Calculate Vitaly's income yield, capital gain yield, and rate of total return for the year.

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Q 217Q 217

What rate of return in the second year of an investment is required to break even after a rate of return of -20% in the first year?

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Q 218Q 218

After two consecutive years of 10% rates of return, what rate of return in the third year will produce a cumulative gain of 30%?

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Q 219Q 219

After two consecutive years of 10% losses, what rate of return in the third year will produce a cumulative loss of 30%?

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Q 220Q 220

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%?

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Q 221Q 221

One year ago, Morgan invested $5,000 to purchase 400 units of a mutual fund. He has just noted in the Financial Post that the fund's rate of return on investment for the year was 22% and that the current price of a unit is $13.75. What amount did the fund distribute as income per unit during the year?

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Q 222Q 222

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?

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Q 235Q 235

Monty purchased a strip bond for his RRSP. He paid $3,800 for a $5,000 face value bond with three years remaining until maturity. What semiannually compounded rate of return will he realize over the three years?

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Q 236Q 236

If the number of workers in the forest industry in Canada declined by 41% from the end of 1993 to the beginning of 2009, what was the compound annual rate of attrition in the industry?

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Q 237Q 237

A number of years ago, your client invested $6,000 at a rate of return of 9% compounded annually. If the investment is currently worth $10,968.25, for how long has she held the investment?

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Q 238Q 238

The maturity value of a four-year, $1,000 investment, is $1175.65. Calculate the nominal rate of interest paid on the investment if interest was compounded quarterly.

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Q 239Q 239

How long will it take a $1,000 investment to grow to $1500 if it earns 3.8% compounded annually?

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Q 240Q 240

Your client wants to invest a $250,000 inheritance and grow it to $325,000. Rounded to the nearest month, how long will this take if the investment earns 7% compounded annually?

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Q 241Q 241

Your client invests $10,000 today at a rate of return of 7.7% compounded quarterly. Rounded to the nearest month, how long will it take the investment to grow to $22,000?

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Q 242Q 242

How long will it take a $2,000 investment to grow to $2501.50 if it earns 4.5% compounded quarterly?

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Q 243Q 243

The Consumer Price Index (based on a value of 100 in 1986) rose from 67.2 in 1980 to 119.5 in 1990. What was the (equivalent) annual rate of inflation in the decade of the 1980s?

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Q 244Q 244

If money is worth 8% compounded quarterly, how long (to the nearest day) before a scheduled payment of $6,000 is $5,000 an equivalent payment? For the purpose of determining the number of days in a partial calendar quarter, assume that a full quarter has 91 days.

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Q 245Q 245

The Canadian Consumer Price Index (based on a value of 100 in 1971) rose from 97.2 in 1970 to 210.6 in 1980 and (based on a value of 100 in 1986) rose from 67.2 in 1980 to 119.5 in 1990. Calculate the annual rate of inflation for the period 1970-1990.

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Q 246Q 246

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.

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Q 247Q 247

The Canadian Consumer Price Index (based on a value of 100 in 1971) rose from 97.2 in 1970 to 113.5 in 1980. What was the (equivalent) annual rate of inflation in the decade of the 1970s?

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Q 248Q 248

An investment grew in value from $5,630 to $8,485 during a five-year period. The annual rate of inflation for the 5 years was 2.3%. What was the compound annual real rate of return during the five years?

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Q 249Q 249

An investment earned 6% compounded semiannually for two years and 8% compounded annually for the next three years. What was the equivalent annually compounded rate of return for the entire five-year period?

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Q 250Q 250

Kristina was earning $10.00 an hour four years ago. Today, she earns $13.50 an hour. At what equivalent compound annual rate has her salary grown over the four years?

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Q 251Q 251

A $5,000 investment was purchased for $4220.50. The bond paid interest at a rate of 3.8% compounded semi-annually until the maturity date. What was the term of the investment?

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Q 252Q 252

At the end of 2009, the Industrial Alliance (IA) Group Dividends Fund had the best 10-year compound annual return of any Canadian diversified equity mutual fund. During the 10-year period, this fund invested primarily in the shares of large Canadian companies. The fund's annual returns in successive years from 2000 to 2009 inclusive were 33.5%, 9.2%, 2.2%, 25.8%, 17.9%, 27.9%, 19.7%, 6.3%, -26.0%, and 21.5%, respectively. For 3-year, 5-year, and 10-year periods ended December 31, 2009, what was the fund's equivalent annual compounded return?

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Q 253Q 253

At the end of 2012, the Trans IMS Canadian Growth Fund had one of the worst 10-year compound annual returns of any Canadian diversified equity mutual fund. The fund's annual returns in successive years from 2000 to 2009 inclusive were -12.8%, -38.3%, -24.1%, 25.4%, 9.2%, 18.6%, 12.0%, -0.2%, -38.5%, and 15.6%, respectively. For 3-year, 5-year, and 10-year periods ended December 31, 2012, what was the fund's equivalent annually compounded return?

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Q 254Q 254

Advances in technology have improved the rate of production of widgets over the last 10 years and the number of plant workers required has declined by 25%. What is the equivalent annual rate of decrease during the period?

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Q 255Q 255

How long will it take an investment to double in value if it earns 4.5% compounded quarterly?

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Q 256Q 256

At the end of 2012, the RBC Canadian Dividend Fund was the largest equity mutual fund in Canada. The aggregate market value of its holdings at the end of 2012 was $9.995 billion. The fund's annual returns in successive years from 2003 to 2012 inclusive were 28.3%, 4.4%, -0.5%, 23.5%, 12.9%, 21.1%, 15.1%, 3.0% - 27.0%, and 27.3% respectively. For the 3-year, 5-year, and 10-year periods ending December 31, 2012, what were the fund's equivalent annually compounded returns?

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Q 257Q 257

A few years ago, Larissa invested $1500 at 3.75% compounded quarterly. If the investment is worth $1693.46 today, how many years ago did Larissa make the investment?

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Q 258Q 258

A $6,000, three-year promissory note bearing interest at 11% compounded semiannually was purchased 15 months into its term for $6,854.12. What monthly compounded discount rate was used in pricing the note?

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Q 259Q 259

Rounded to the nearest month, how long before a scheduled payment of $10,000 would a payment of $5,000 be an economically equivalent alternative? Assume money is worth 5% compounded annually.

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Q 260Q 260

An investor's portfolio increased in value from $35,645 to $54,230 over a six-year period. At the same time, the Consumer Price Index rose by 26.5%. What was the portfolio's annually compounded real rate of return?

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Q 261Q 261

For three successive years, an investment paid annual rates of return of 5.8%, 3.4%, and -2.25%. Calculate the funds equivalent annually compounded rate of return over the three years.

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Q 262Q 262

Over a five-year period, Hardip's $2,000 investment grew to $2675. At the same time, the CPI increased from 106.1 to 109.1. What was Hardip's real compound rate of return?

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Q 263Q 263

The proceeds from the sale of a $3500 four-year promissory note bearing interest at 5% compounded quarterly were $3612.31. The note was discounted to yield 6.8% compounded semiannually. When was the note sold?

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Q 284Q 284

If an interest rate of 8.9% compounded semiannually is charged on a car loan, what effective rate of interest should be disclosed to the borrower?

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Q 285Q 285

Calculate the effective rate of interest if $1,000 grows to $1459.74 in five years with semiannual compounding.

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Q 286Q 286

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

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Q 288Q 288

Enrique wants to borrow $15,000 for a new car. The bank has personal loans at 5.25% compounded monthly, whereas the credit union at his company is offering personal loans at 5.5% compounded annually. Which should Enrique accept?

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Q 289Q 289

A bank quotes 7.25% compounded monthly on a loan. What is the effective rate of interest charged?

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Q 290Q 290

A furniture company has decided to drop the effective rate on its credit card by 2%. The store currently charges a periodic rate of 1.85% per month. What new periodic rate should the store advertise?

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Q 291Q 291

A department store currently charges an effective rate of 18% on its credit card. The store wants to add .25% per month to its monthly compounded rate. What new monthly compounded rate will the store charge?

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Q 312Q 312

For a two-year GIC, what nominal rate compounded quarterly would pay the same amount of interest as 3.8% compounded annually?

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Q 313Q 313

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

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Q 315Q 315

For a three-year investment, what rate compounded semiannually is equivalent to 4.6% compounded quarterly?

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Q 316Q 316

Kristina can invest in a two-year GIC for 5.85% compounded monthly or 6% compounded annually. Which option pays the most interest? Support your answer with calculations.

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Q 317Q 317

If the Halifax Real Estate Board reports that house prices increased by 8% during the first seven months of the year, and if prices continue to rise at the same rate for the subsequent five months, what will be the (compound) increase for the entire year?

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Q 318Q 318

The current (simple annualized) yield on a money market mutual fund, based on the return for the most recent seven days, is 5.62%. What effective (annualized) yield will be reported for the fund?

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Q 319Q 319

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?

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Q 320Q 320

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?

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Q 321Q 321

Marcie received an invoice for $150, with terms 2/15, net 30. Determine the effective annualized rate of return equivalent to the discount.

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Q 322Q 322

Three years ago, General Avionics announced plans to triple its annual R&D spending over the next 4 years. If R&D spending was increased by 25%, 30%, and 35% in the first 3 years, what minimum percent increase is required in the fourth year to reach the target?

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Q 323Q 323

Jeff purchased some Mitel preferred shares on the Toronto Stock Exchange for $13.50. The shares pay a quarterly dividend of $0.50. Nine months later the shares were trading at $15.25. What was Jeff's rate of total return for the 9-month period?

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Q 324Q 324

Gabriel received $200 of income from an investment during the past year. This represents an income yield of 4%. If the capital gain yield for the year was 10%, what was the value of the investment (not including income) at the end of the year?

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Q 325Q 325

An $8600 investment was worth only $7900 one year later. If the rate of total return for the year was -5%, how much income was received from the investment during the year?

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Q 326Q 326

Last year, the Muirs purchased a rental condo in Woodbridge for $300,000. During the year, they paid $4,000 for property taxes and $2400 for repairs, and collected $1850 per month in rent. The home has increased in value to $335,000. Calculate the following:
a) Income yield.
b) Capital gain yield.
c) Rate of total return.
d) Total return.

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Q 327Q 327

In the last year, the market value of the Muirs' bonds has declined from $1040.25 to $1020.75 each, and the coupons paid $30 in interest semi-annually. Calculate the following:
a) Income yield.
b) Capital gain yield.
c) Rate of total return.

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Q 328Q 328

An investor purchased preferred shares on the Toronto Stock Exchange for $15.00. The shares pay a semi-annual dividend of $1.12. Six months later, the shares were trading at $14.50. What was the rate of total return for the six-month period?

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Q 329Q 329

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?

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Q 330Q 330

What rate of return in the second year of an investment is required to break even after a 30% loss in the first year?

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Q 331Q 331

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

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