A $35,000 loan bearing interest at 5% compounded quarterly was repaid, after a period of deferral, by quarterly payments of $1573.83 over 12 years. What was the time interval between the date of the loan and the first payment?
> How much will it cost to purchase a 20-year indexed annuity in which the end-of-quarter payments start at $5000 and grow by 0.5% every quarter? Assume that the money used to purchase the annuity earns 6% compounded quarterly.
> Simplify and collect the like terms. k ( 1 + 0.04 ) 2 + 2 k ( 1 + 0.04 ) 2
> Randall wants to accumulate $750,000 in his RRSP by the end of his 30-year working career. What should be his initial year-end contribution if he intends to increase the contribution by 3% every year and the RRSP earns 10% compounded annually?
> Chantal will make year-end contributions for 30 years to an RRSP earning 8% compounded annually. 1. How much will she have after 30 years if the annual contribution is $2000? 2. How much more will she have after 30 years if she increases the contribution
> Using the Constant-Growth Annuity Chart An interactive chart for the future value of a constant-growth annuity is available on Connect. In Student Edition, find “Constant-Growth Annuity.” The chart has data input boxes in which you can enter values for P
> The dividends on the common shares of Mosco Inc. are forecast to grow at 10% per year for the next five years. Thereafter, the best guess is that the annual dividend will grow at the same 3% annual rate as the nominal GNP. A $2.00 dividend for the past y
> Maritime Bank recently announced that its next semiannual dividend (to be paid six months from now) will be $1.00 per share. A stock analyst’s best estimate for the growth in future dividends is 5% compounded semiannually. 1. If you require a rate of ret
> Suppose year-end contributions to an RRSP start at $3000 and increase by 2.5% per year thereafter. What amount will be in the RRSP after 25 years if the plan earns 9% compounded annually?
> A city sells plots in its cemetery for $1000 plus an amount calculated to provide for the cost of maintaining the grounds in perpetuity. This cost is figured at $25 per plot due at the end of each quarter. If the city can invest the funds to earn 4.8% co
> The alumni association of Seneca College is initiating a one-year drive to raise money for a perpetual scholarship endowment fund. The goal is to offer ten scholarships per year, each worth $5000. 1. How large a fund is required to begin awarding the sch
> An old agreement requires a town to pay $500 per year in perpetuity to the owner of a parcel of land for a water well dug on the property in the 1920s. The well is no longer used, and the town wants to buy out the contract, which has become an administra
> Ranger Oil recently donated $750,000 to the Northern Alberta Institute of Technology (NAIT) to fund (in perpetuity) five annual bursaries for students in Petroleum Engineering Technology. If the first five bursaries are to be awarded immediately, what is
> Simplify and collect the like terms. h ( 1 + 0.055 ) 2 − 3 h ( 1 + 0.055 ) 3
> How much more money is required to fund an ordinary perpetuity than a 30-year ordinary annuity if both pay $5000 quarterly and money can earn 5% compounded quarterly?
> In 1752, the British government converted all of its outstanding bonds to perpetual bonds that paid a fixed interest rate. These bonds paid only the interest every three months—the principal amount of the debt would never be repaid. The perpetual bonds h
> A perpetuity is to pay $10,000 at the end of every six months. How much less money is required to fund the perpetuity if the money can be invested to earn 5% compounded semiannually instead of 4% compounded semiannually?
> What amount is required to fund a perpetuity that pays $10,000 at the beginning of each quarter? The funds can be invested to earn 5% compounded quarterly.
> A legal dispute delayed for 18 months the disbursement of a $500,000 bequest designated to provide quarterly payments in perpetuity to a hospice. While under the jurisdiction of the court, the funds earned interest at the rate of 5% compounded semiannual
> A wealthy benefactor has donated $1,000,000 to establish a perpetuity that will be used to support the operating costs of a local heritage museum scheduled to open in three years’ time. If the funds earn 4.8% compounded monthly, what monthly payments, th
> Mr. Chan has donated $1 million to a college to set up a perpetuity for the purchase of books and journals for a new library to be built and named in his honour. The donation will be invested and earnings will compound for three years, at which time the
> The common shares of Unicorp. are forecast to pay annual dividends of $2 at the end of each of the next five years, followed by dividends of $3 per year in perpetuity. What is the fair market value of the shares if the market requires an 8% annually comp
> What sum of money, invested today in a perpetual fund earning 5.5% compounded semiannually, will sustain quarterly perpetuity payments of $1000 if the first payment is made 1. three months from today? 2. one year from today?
> Mr. O’Connor set up a trust account paying $500 per month in perpetuity to the local SPCA. These payments consume all of the interest earned monthly by the trust. Between what amounts does the balance in the trust account fluctuate if it earns 6% compoun
> Simplify and collect the like terms. P 1 + 0.095 × 5 12 + 2 P ( 1 + 0.095 × 171 365)
> A company’s perpetual preferred shares pay a semiannual dividend of $1.50. The next dividend will be paid tomorrow. 1. At what price would the shares provide an investor with a 4.5% semiannually compounded rate of return? The investor will receive tomorr
> A company’s preferred shares pay a $2 dividend every six months in perpetuity. What is the fair market value of the shares just after payment of a dividend if the dividend yield required by the market on shares of similar risk is 1. 4% compounded semiann
> Mrs. O’Reilly donated $500,000 to Medicine Hat College for a perpetual scholarship fund for women in business studies. What amount can be awarded on each anniversary, if the scholarship fund earns 4 1 2 % compounded annually?
> Marion’s grandfather’s will established a trust that will pay her $1500 every three months for 11 years. The first payment will be made six years from now, when she turns 19. If money is worth 6.5% compounded quarterly, what is today’s economic value of
> Mr. Haddit plans to retire eight years from today. He projects that he will need $30,000 per year in his retirement, which he assumes will be for 15 years. The first payment will be nine years from today. To fund his retirement, Mr. Haddit will invest a
> A loan granted today will be repaid by payments of $500 per month running for 3 1 2 years. The first payment is due 2 years and 10 months from today. What amount was borrowed if the interest rate on the loan is 9% compounded quarterly?
> The first quarterly payment of $750 in a five-year annuity will be paid 3 3 4 years from now. Based on a discount rate of 8.25% compounded monthly, what is present value of the payments today?
> A deferred annuity consists of an ordinary annuity paying $2000 semiannually for a 10-year term after a 5-year period of deferral. Calculate the deferred annuity’s present value using a discount rate of 4% compounded quarterly.
> What amount of money invested now will provide monthly payments of $200 for five years, if the ordinary annuity is deferred for 3 1 2 years and the money earns 7.5% compounded monthly?
> Duncan retired recently and plans to utilize other savings for a few years while his RRSP continues to grow on a tax-deferred basis. The RRSP is currently worth $142,470. How long will it be until the amount in the RRSP is large enough to purchase a 25-y
> Simplify and collect the like terms. y ( 1 − 0.125 × 213 365 ) + 2 y 1 + 0.125 × 88 365
> What minimum initial amount of money, invested to earn 4% compounded monthly, will support a monthly payout of $500 for 3 1 2 years if the first payment occurs 2 years and 10 months from now?
> For how long (before the beginning of the term of the annuity) must a $19,665 investment earning 3.5% compounded semiannually be allowed to grow before it can provide 60 quarterly withdrawals of $1000?
> An investor purchased a deferred annuity contract for $4608.07, a price calculated to provide a rate of return on investment of 9.75% compounded monthly. The semiannual payments of $400, once started, continue for a term of 15 years. How long is the peri
> Sabrina borrowed $30,000 at an interest rate of 7% compounded quarterly. Monthly payments of $356.83 will commence after a period of deferral and will pay off the loan over the subsequent 12 1 2 years. What is the length of the period of deferral?
> To sell a farm that it had acquired in a foreclosure action, the RBC Royal Bank agreed to monthly payments of $2700 for 20 years, with the first payment due 15 months from the date of sale. If the purchaser paid 15% down and the interest rate on the bala
> What is the current economic value of an inheritance that will pay $2000 to the beneficiary at the beginning of every three months for 20 years, starting when the beneficiary reaches 20 years of age, 4 1 2 years from now? Assume that money is worth 6% co
> What amount must be invested today to provide for quarterly payments of $2500 at the end of every quarter for 15 years after a six-year deferral period? Assume that the funds will earn 5% compounded semiannually.
> Mr. Donatelli moved from Toronto to Winnipeg to take a job promotion. After selling their Toronto home and buying a home in Winnipeg, the Donatellis have $85,000 in cash on hand. If the funds are used to purchase a deferred annuity from a life insurance
> Mrs. Corriveau has just retired at age 58 with $160,360 in her RRSP. She plans to live off other savings for a few years and allow her RRSP to continue to grow on a tax-deferred basis until there is an amount sufficient to purchase a 25-year annuity payi
> A $10,000 investment will be allowed to grow at 4.5% compounded semiannually until it can support semiannual withdrawals of $1000 for 20 years. Rounded to the nearest month, how long before the first withdrawal must the investment be allowed to grow?
> Simplify and collect the like terms. 8 x 0.5 + 5.5 x 11 + 0.5 ( 4.6 x − 17 )
> Vencap Enterprises is evaluating an investment opportunity that can be purchased for $55,000. Further product development will require contributions of $30,000 in Year 1 and $10,000 in Year 2. Returns of $20,000, $60,000, and $40,000 are expected in the
> A finance company paid a merchant $3975 for a conditional sale contract after discounting it to yield 18% compounded monthly. If the contract is for 20 monthly payments of $256.96 following a payment-free period, what is the time interval between the dat
> A life insurance company can invest funds to earn (after expenses) 8% compounded quarterly. A client wishes to purchase a five-year ordinary annuity that will commence 3 1 2 years from now. What will the insurance company charge for the annuity, if the q
> Negotiations between Delco Manufacturing and the union representing its employees are at an impasse. The union is seeking a 4.5% wage increase. Delco’s offer is 2%. The employees have passed a vote authorizing job action. Suppose the union succeeds in wi
> If money can earn 6.5% compounded annually for the next 20 years, which of the following annuities has the greater economic value today: $1000 paid at the end of each of the next 10 years, or 10 annual payments of $2000 with the first payment occurring 1
> Noel has $300,000 with which to purchase an ordinary annuity delivering monthly payments for 20 years after a 10-year period of deferral. What monthly payment will he receive, if the undistributed funds earn 5% compounded semiannually?
> What price will a finance company pay to a merchant for a conditional sale contract that requires 15 monthly payments of $231 beginning in six months? The finance company requires a rate of return of 18% compounded monthly.
> A conditional sale contract requires the debtor to make six quarterly payments of $569, with the first payment due in six months. What amount will a finance company pay to purchase the contract on the date of sale if the finance company requires a rate o
> Ronelda has accumulated $33,173.03 in her RRSP. If she makes no further contributions and her RRSP continues to earn 3.75% compounded monthly, for how long a period of deferral must she wait before her RRSP can sustain month-end withdrawals of $400 for 1
> For $30,000, Manny purchased a deferred ordinary annuity from an insurance company that will pay him quarterly payments of $1076.71 for 12 1 2 years. The payments are based upon the purchase amount earning 7% compounded quarterly. When will Manny receive
> Simplify and collect the like terms. 2 x 1.045 − 2.016 x 3 + x 2
> A deferred ordinary annuity is comprised of eight annual payments of $1500. What is the period of deferral if the present value of the payments, discounted at 7.9% compounded annually, is $6383.65?
> Using an inheritance he recently received, Sam wants to purchase a deferred annuity that will pay $5000 every three months between age 60 (when he plans to retire) and age 65 (when his permanent pension will begin). The first payment is to be three month
> The first of 10 semiannual payments of $2000 will be made 5 1 2 years from today. What is the present value of this deferred annuity using a discount rate of 7% compounded semiannually?
> Corbin wants to accumulate $1,000,000 over the next 25 years by investing the same amount at the beginning of each month. If he can expect a long-term rate of return of 8% compounded annually, how much must he invest each month?
> Liam purchases an annuity for $700,000 that provides beginning-of-month payments for 15 years. If the annuity earns 4.5% compounded monthly, what monthly payment will he receive?
> Nitesh currently has accumulated capital of $560,000 and hopes to retire this year. He wants to receive an annuity payment at the beginning of each year for the next 20 years. If the capital can earn 6.5% compounded annually, what maximum annual payment
> Gina has $500,000 accumulated in her RRSP and intends to use the amount to purchase a 20-year annuity. She is investigating the size of quarterly payment she can expect to receive, depending on the rate of return earned by the funds. What nominal rate of
> Mr. van der Linden has just used the funds in his RRSP to purchase a 25-year annuity earning 8% compounded semiannually and paying $3509 at the beginning of each month. Mr. van der Linden made his last regular semiannual contribution of $2500 to his RRSP
> As a result of the closure of the mine at which he had been employed, Les Orr received a $27,000 severance settlement on his 53rd birthday. He rolled the severance pay into a new RRSP and then, at age 62, used the accumulated funds to purchase an annuity
> Mr. Ng contributed $1000 to an RRSP at the beginning of each calendar quarter for the past 20 years. The plan earned 10% compounded quarterly for the first 10 years and 12% compounded quarterly for the last 10 years. He is converting the RRSP to a Regist
> Simplify and collect the like terms. 2 x + 9 4 − 1.2 ( x − 1 )
> A $500,000 life insurance policy for a 26-year-old offers four alternative premium payment plans: an annual premium of $470.00, semiannual premiums of $241.50, quarterly premiums of $123.37, or monthly premiums of $42.30. In every case, the premiums are
> The same disability insurance policy offers four alternative premium payment plans: an annual premium of $666.96, semiannual premiums of $341.32, quarterly premiums of $173.62, or monthly premiums of $58.85. In every case, the premiums are payable in adv
> Continental Life Insurance Company of Canada offered $250,000 of term life insurance to a 40-year-old female nonsmoker for an annual premium of $447.50 (in advance) or for monthly premium payments (in advance) of $38.82 by preauthorized electronic debit.
> Ichiro is checking potential outcomes for the growth of his RRSP. He plans to make contributions of $500 at the beginning of each month. What nominal rate of return must his RRSP earn for its future value after 25 years to be: 1. $400,000? 2. $500,000? 3
> A magazine offers a one-year subscription rate of $63.80 and a three-year subscription rate of $159.80, both payable at the start of the subscription period. Assuming that you intend to continue to subscribe for three years and that the one-year rate doe
> The Lifestyle Fitness and Exercise Centre charges annual membership fees of $600 (in advance) or six “easy” payments of $120 at the beginning of every two months. What effective interest rate is being charged on the installment plan?
> The annual membership dues in the Rolling Meadows Golf and Country Club can be paid by four payments of $898.80 at the beginning of each calendar quarter, instead of by a single payment of $3428 at the beginning of the year. What effective rate of intere
> Jamshid borrowed $350 from his mother at the beginning of every month for 2 1 2 years while he attended Seneca College. 1. If the interest rate on the accumulating debt was 6% compounded semiannually, what amount did he owe his mother at the end of the 2
> Quantum Research Ltd. has arranged debt financing from its parent company to complete the development of a new product. Quantum “draws down” $12,000 at the beginning of each month. If interest accumulates on the debt at 8.2% compounded quarterly, how lon
> If you contribute $1000 to an RRSP at the beginning of every three months for 25 years and then use the accumulated funds to purchase an annuity paying $3000 at the beginning of each month, what will be the term of the annuity? Assume that the RRSP earns
> Simplify and collect the like terms. x 2 − x 2 + 4 5 − 0.2 x 2 − 4 5 x + 1 2
> Mrs. McPherson wants to use $10,000 from her late husband’s estate to assist her grandson when he enters college in seven years. Assume the $10,000 is invested immediately at 4% compounded monthly, and the grandson will make beginning-of-month withdrawal
> RRSP contributions of $5000 are made at the beginning of every six months. How many more contributions will it take to reach $750,000 if the RRSP earns 8% compounded semiannually than if it earns 10% compounded semiannually?
> Ambleside Golf Club’s board of directors has set next year’s membership fee at $1900, payable at the beginning of the year. The board has instructed its accountant to calculate beginning-of-quarter and beginning-of-month payment plans that provide a 6% s
> Mr. and Mrs. Friedrich have just opened an RESP for their daughter. They want the plan to pay $3000 at the beginning of each half-year for four years, starting nine years from now when their daughter will enter college or university. What semiannual cont
> For how long will a $100,000 fund sustain beginning-of-month withdrawals of $700 if the fund earns: 1. 4% compounded monthly? 2. 5% compounded monthly? 3. 6% compounded monthly? 4. 7% compounded monthly?
> Advantage Leasing Ltd. is in the business of purchasing equipment, which it then leases to other companies. Advantage calculates the payments on its five-year leases so that it recovers the original cost of the equipment plus a return on investment of 15
> For the past 13 years, Ms. Perrault has contributed $2000 at the beginning of every six months to a mutual fund. If the mutual fund statement at the end of the 13 years reports that her fund units are worth a total of $91,477, what has been the semiannua
> If a furniture store offers to sell a refrigerator priced at $1195 on a conditional sale contract requiring 12 monthly payments of $110 (including a payment on the date of sale), what effective rate of interest is being charged to the customer?
> As of the date of Victory Machine Shop’s most recent financial statements, three years remained in the term of a capital lease reported as a long-term liability of $13,824. If the beginning-of-month lease payments are $450, what monthly compounded annual
> If contributions of $1500 at the beginning of every three months resulted in an RRSP worth $327,685 after 20 years, what quarterly compounded nominal rate and effective rate of return did the RRSP earn?
> Evaluate values of the variables. Calculate the result accurate to the nearest cent. P(1 + i)n for P = $1280, i = 0.025, n = 3
> Pembroke Golf Club’s initiation fee is $5500. It offers an installment payment alternative of $1000 down and $1000 at the end of each year for five years. What effective rate of interest is being charged on the installment plan?
> An RRSP is now worth $223,000 after contributions of $2500 at the beginning of every six months for 16 years. What effective rate of return has the plan earned?
> If a furniture retailer offers a financing plan on a $1500 purchase requiring four equal quarterly payments of $400 including the first payment on the purchase date, what effective rate of interest is being charged on the unpaid balance?
> How many fewer deposits will it take to accumulate savings of $100,000 with beginning-of-month deposits of $220 than with beginning-of-month deposits of $200? The savings earn 5.4% compounded monthly.
> How much longer will a $100,000 fund earning 9% compounded monthly sustain beginning-of-month withdrawals of $900 than beginning-of-month withdrawals of $1000?
> How long will it take an RRSP to grow to $600,000 if it receives a contribution of $2500 at the beginning of each quarter and it earns: 1. 3% compounded quarterly? 2. 6% compounded quarterly? 3. 8% compounded quarterly? 4. 9% compounded quarterly?
> The payments required on a contractual obligation are $500 per month. The contract was purchased for $13,372 just before a regular payment date. The purchaser determined this price based on his required rate of return of 9.75% compounded monthly. How man
> Central Personnel’s accountant set up a long-term lease liability of $11,622.73 to recognize a new contract for the lease of office furniture. She used the firm’s 10.5% monthly compounded cost of borrowing as the discount rate. If the lease payment at th
> Kim wants to save half of the $30,000 purchase price of a new car by making monthly deposits of $700, beginning today, into a T-bill savings account earning 4.2% compounded monthly. How long will it take him to reach his goal?
> RentalTown advertised a computer system at a cash price of $1699 and at a rent-to-own rate of $129 at the beginning of each month for 24 months. What effective rate of interest is a customer paying to acquire the computer in a rent-to-own transaction?
