Question: A company’s preferred shares pay a $

> A firm received a bill from its accountant for $3310, representing a combined total of 41 billable hours for both the Certified General Accountant (CGA) and her accounting technician for conducting the firm’s audit. If the CGA charges her time at $120 pe

> The introduction of a new product will require a $400,000 investment in demonstration models, promotion, and staff training. The new product will increase annual profits by $100,000 for the first four years and $50,000 for the next four years. There will

> A capital investment requiring one initial cash outflow is forecast to have the operating profits listed below. The investment has an NPV of $20,850, based on a required rate of return of 12%. Calculate the payback period of the investment.

> A potato farmer needs to buy a new harvester. Two types have performed satisfactorily in field trials. The SpudFinder costs $100,000 and should last for five years. The TaterTaker also costs $100,000 but requires an extra operator at $20,000 per season.

> The provincial government’s Ministry of Fisheries requires a new patrol boat. The price of a Songster is $90,000, and its annual operating costs will be $10,000. It will be sold for about $20,000 after five years, and replaced. A more durable and more ef

> A U-Print store requires a new photocopier. A Sonapanic copier with a four-year service life costs $35,000 and will generate an annual profit of $14,000. A higher-speed Xorex copier with a five-year service life costs $52,000 and will return an annual pr

> Machine X costs $50,000 and is forecast to generate an annual profit of $16,000 for five years. Machine Y, priced at $72,000, will produce the same annual profit for ten years. The trade-in value of X after five years is expected to be $10,000, and the r

> The investment committee of a company has identified the following seven projects with positive NPVs. If the board of directors has approved a $4.5 million capital budget for the current period, which projects should be selected?

> The expected profits from an $80,000 investment are $15,000 in Year 1 and $20,000 in each of Years 2 to 7. 1. What is the investment’s payback period? 2. If the firm’s required payback period is four years, will it make the investment? 3. If the firm’s c

> The Cowichan Regional District borrowed $500,000 through the Provincial Finance Authority to purchase fire-fighting equipment. At the end of every six months, the regional district must make a sinking fund payment of a size calculated to accumulate $500,

> Calculate the quoted price on June 10, 2019, of the bond.

> Quality Grocer makes its own bulk “trail mix” by mixing raisins and peanuts. The wholesale cost of raisins is $3.75 per kg and the cost of peanuts is $2.89 per kg. To the nearest 0.1 kg, what amounts of peanuts and raisins should be mixed to produce 50 k

> A New Brunswick Power bond issue carrying a 7.6% coupon matures on November 1, 2031. At what price did $1000 face value bonds trade on June 10, 2019, if the yield to maturity required by the bond market on that date was 5.9% compounded semiannually?

> Calculate the yield to maturity on a $1000 face value bond purchased for $1034.50 if it carries a 7.9% coupon and has 8 1 2 years remaining until maturity.

> Two and one-half years ago, Nova Scotia Power sold an issue of 25-year, 8% coupon bonds. If the current semiannually compounded return required in the bond market is 6.9%, calculate the percent capital gain or loss on the bonds over the entire 2 1 2 -yea

> A $1000 face value, 6.8% coupon, Province of Ontario bond with 18 years to run until maturity is currently priced to yield investors 6.5% compounded semiannually until maturity. How much lower would the bond’s price have to be to make the yield to maturi

> Four and one-half years ago, Glenda purchased 15 $1000 bonds in a Province of New Brunswick issue carrying an 8.5% coupon and priced to yield 9.8% (compounded semiannually). The bonds then had 18 years remaining until maturity. The bond market now requir

> Four years after the issue of a $10,000, 9.5% coupon, 20-year bond, the rate of return required in the bond market on long-term bonds was 7.8% compounded semiannually. 1. At what price did the bond then sell? 2. What capital gain or loss (expressed in do

> The municipality of Duncan has financed a sewage treatment plant by issuing $18 million worth of sinking fund debentures. The debentures have a 15-year term and pay a coupon rate of 9% compounded semiannually. Rounding the sinking fund payments, interest

> Laurentian Airways is preparing for the replacement of one of its passenger jets in three years by making payments to a sinking fund at the beginning of every six months for the next three years. The fund can earn 6% compounded semiannually, and the capi

> If a broker quotes a price of 111.25 for a bond on September 10, what amount will a client pay per $1000 face value? The 7% coupon rate is payable on May 15 and November 15 of each year.

> A $1000, 6.5% coupon, 20-year Government of Canada bond was issued on June 15, 2016. At what price did it trade on December 10, 2020, when the market’s required return was 5.2% compounded semiannually?

> Dash Canada offers two long-distance telephone plans. Plan X costs 6.5 cents per minute for calls between 8 a.m. and 6 p.m. weekdays (business hours) and 4.5 cents per minute at other times. Plan Y costs 5.3 cents per minute any time. Above what percenta

> A $1000, 9.5% coupon Government of Canada bond has 10 years remaining until its maturity. It is currently priced at 108.25 (percent of face value). 1. What is the bond’s yield to maturity? 2. If the bond price abruptly rises by $25, what is the change in

> A $1000, 7.5% coupon bond has 19 1 2 years remaining until maturity. Calculate the bond discount if the required return in the bond market is 8.6% compounded semiannually.

> $255,000 amount from an RRSP is used to purchase an annuity paying $6000 at the end of each quarter. The annuity provides an annually compounded rate of return of 2.5%. 1. What will be the amount of the final payment? 2. What will be the interest portion

> The interest rate on a $6400 loan is 10% compounded semiannually. If the loan is to be repaid by monthly payments over a four-year term, prepare a partial amortization schedule showing details of the first two payments, Payments 34 and 35, and the last t

> An annuity providing a rate of return of 4.8% compounded monthly was purchased for $45,000. The annuity pays $400 at the end of each month. 1. How much of Payment 37 will be interest? 2. What will be the principal portion of Payment 92? 3. How much inter

> Suppose that the loan permits an additional prepayment of principal on any scheduled payment date. Prepare another amortization schedule that reflects a prepayment of $5000 with the third scheduled payment. How much interest is saved as a result of the p

> Metro Construction received $60,000 in vendor financing at 10.5% compounded semiannually for the purchase of a loader. The contract requires semiannual payments of $10,000 until the debt is paid off. Construct the complete amortization schedule for the d

> A 20-year annuity was purchased with $180,000 that had accumulated in an RRSP. The annuity provides a semiannually compounded rate of return of 5% and makes equal month-end payments. 1. What will be the principal portion of Payment 134? 2. What will be t

> $28,000 loan at 8% compounded quarterly is to be repaid by equal quarterly payments over a seven-year term. 1. What will be the principal component of the sixth payment? 2. What will be the interest portion of the 22nd payment? 3. How much will the loan’

> Givens, Hong, and Partners obtained a $7000 term loan at 8.5% compounded annually for new boardroom furniture. Prepare a complete amortization schedule in which the loan is repaid by equal semiannual payments over three years.

> The board of directors of Meditronics Inc. has designated 100,000 stock options for distribution to employees and management of the company. Each of three executives is to receive 2000 more options than each of eight scientists and engineers. Each scient

> After two years of the first five-year term at 6.7% compounded semiannually, Dan and Laurel decide to take advantage of the privilege of increasing the payments on their $110,000 mortgage loan by 10%. The monthly payments were originally calculated for a

> The interest rate for the first five years of a $95,000 mortgage is 7.2% compounded semiannually. Monthly payments are based on a 25-year amortization. If a $3000 prepayment is made at the end of the third year: 1. How much will the amortization period b

> A $25,000 home improvement (mortgage) loan charges interest at 6.6% compounded monthly for a three-year term. Monthly payments are based on a 10-year amortization and rounded up to the next $10. What will be the principal balance at the end of the first

> A mortgage calls for monthly payments of $887.96 for 25 years. If the loan was for $135,000, calculate the semiannually compounded nominal rate of interest on the loan.

> The interest rate for the first five years of a $90,000 mortgage loan is 5.25% compounded semiannually. Monthly payments are calculated using a 20-year amortization. 1. What will be the principal balance at the end of the five-year term? 2. What will be

> Niagara Haulage obtained an $80,000 loan at 7.2% compounded monthly to build a storage shed. Construct a partial amortization schedule for payments of $1000 per month showing details of the first two payments, Payments 41 and 42, and the last two payment

> The interest rate for the first three years of an $87,000 mortgage is 4.4% compounded semiannually. Monthly payments are based on a 20-year amortization. If a $4000 prepayment is made at the end of the 16th month: 1. How much will the amortization period

> A mortgage contract for $45,000 written 10 years ago is just at the end of its second five-year term. The interest rates were 8% compounded semiannually for the first term and 7% compounded semiannually for the second term. If monthly payments throughout

> Jessica bought a $1150 television set for 25% down and the balance to be paid with interest at 11.25% compounded monthly in six equal monthly payments. Construct the full amortization schedule for the debt. Calculate the total interest paid.

> C&D Stereo sold a stereo system on a plan that required no down payment and nothing to pay until January 1 (four months away). Then the first of 12 monthly payments of $226.51 must be made. The payments were calculated to provide C&D Stereo with a return

> Steel is an alloy of iron and nickel. A steel recycling company has two piles of scrap steel. Pile A contains steel with 5.25% nickel content; Pile B contains steel with 2.84% nickel. The company has an order for 32.5 tonnes of steel containing 4.15% nic

> Lola Fritola is planning for her retirement by making quarterly payments to an annuity with each payment increasing by 0.4% every quarter. Her first payment is $4500 and she plans to contribute for the next 10 years. How much will she have in her retirem

> How much will it cost to purchase a 15-year constant growth annuity paying $10,000 at the end of every year if it earns 5.5% compounded annually and is indexed to an inflation rate of 2% annually?

> Mrs. McTavish wants to establish an annual $5000 scholarship in memory of her husband. The first scholarship is to be awarded two years from now. If the funds can earn 6.25% compounded annually, what amount must Mrs. McTavish pay now to sustain the schol

> Mr. Larsen’s will directed that $200,000 be invested to establish a perpetuity making payments at the end of each month to his wife for as long as she lives and subsequently to the Canadian Heart Foundation. What will the payments be if the funds can be

> If money can earn 6% compounded annually, what percentage more money is required to fund an ordinary perpetuity paying $1000 at the end of every year, than to fund an ordinary annuity paying $1000 per year for 25 years?

> What price will a finance company pay to a merchant for a conditional sale contract that requires 12 monthly payments of $249, with the first payment due six months from now? The finance company requires a return of 16.5% compounded monthly.

> $30,000 loan bearing interest at 9% compounded monthly was repaid, after a period of deferral, by monthly payments of $425.10 for 10 years. What was the time interval between the date of the loan and the first payment?

> Fred asked two life insurance companies to give quotes on a 20-year deferred annuity (after a 5-year deferral period) that can be purchased for $100,000. Northwest Mutual quoted payments of $875 payable at the end of each month. Liberty Standard stated t

> What percentage more money is required to fund an ordinary perpetuity than to fund a 30-year ordinary annuity, if the funds can earn 5.8% compounded semiannually? The perpetuity and the annuity each pay $1000 semiannually.

> Erin has invested in both an equity mutual fund and a bond mutual fund. Her financial adviser told her that her overall portfolio rose in value by 1.1% last year. Erin noted in the newspaper that the equity fund lost 3.3% last year while the bond fund ro

> Wildcat Drilling Contractors Inc. is considering the acquisition of a new deep-drilling rig at a cost of $14 million. With this added drilling capability, the company’s net operating profits would increase by $2 million in the first year and grow by 10%

> Dr. Pollard donated $100,000 to the Canadian National Institute for the Blind. The money is to be used to make semiannual payments in perpetuity (after a period of deferral) to finance the recording of books-on-CD for the blind. The first perpetuity paym

> How much more money is required to fund an ordinary perpetuity than a 25-year ordinary annuity, if the funds can earn 7% compounded quarterly, and both pay $500 monthly?

> The common shares of Bancorp Ltd. are forecast to pay annual dividends of $3 at the end of each of the next five years, followed by dividends of $2 per year in perpetuity. What is the fair market value of the shares if the market requires a 10% annually

> What minimum amount will have to be dedicated today to a fund earning 5.6% compounded quarterly, if the first quarterly payment of $2000 in perpetuity is to occur: 1. Three months from now? 2. Five years from now?

> What is the current economic value of an inheritance that will pay $2500 to the beneficiary at the beginning of every three months for 20 years starting when the beneficiary reaches 21 years of age, 5 1 4 years from now? Assume that money can earn 6% com

> What amount of money invested now will provide payments of $500 at the end of every month for five years following a four-year period of deferral? The money will earn 7.2% compounded monthly.

> Suppose that $5000 is contributed at the beginning of each year to an RRSP that earns 5% compounded annually. 1. How many contributions will it take to accumulate the first $500,000? 2. How many more contributions will it take for the RRSP to reach $1,00

> A seven-year capital lease of an executive jet requires semiannual payments of $200,000 at the beginning of each six-month period. The company can borrow funds for 5 to 10 years at 7.4% compounded semiannually. 1. What long-term lease liability will the

> A life insurance company quoted an annual premium of $387.50 (payable at the beginning of the year) for a $250,000 term insurance policy on a 35-year-old male nonsmoker. Alternatively, the insured can pay $33.71 at the beginning of each month by preautho

> Calculate the amount that will be accumulated after 20 years if: 1. $1000 is invested at the beginning of every six months at 8.5% compounded semiannually. 2. $2000 is invested at the beginning of every year at 8.5% compounded annually.

> A city’s commercial construction by-laws require five parking spaces for every 100 square metres of retail rental space in a shopping centre. Four percent of the parking spaces must be large spaces for the physically handicapped. Of the remainder, there

> An RRSP is now worth $316,000 after contributions of $3500 at the beginning of every six months for 17 years. What effective rate of return has the plan earned?

> Regular investments made at the beginning of each quarter earn 6% compounded quarterly. How many more $1000 investments than $1100 investments will it take to accumulate $100,000?

> A life insurance company is calculating the monthly premium that it will offer clients as an alternative to paying the full annual premium. With both alternatives, premiums are payable at the beginning of the period of coverage. If the monthly payment by

> What maximum annual withdrawals will a $300,000 fund earning 7.75% compounded annually sustain for 25 years if the withdrawals are made: 1. At the beginning of each year? 2. At the end of each year?

> New Look Fitness Centre offers a one-year membership for $500 in advance, or a three-month membership for $160 in advance. What effective rate of interest is an individual paying if she buys four consecutive three-month memberships instead of a one-year

> Capital Leasing leases commercial kitchen equipment to restaurants, hotels, hospitals, and other institutions. Capital Leasing calculates the payments on its four-year leases so that it recovers the purchase price of the equipment plus a return on invest

> Suppose you contribute $2500 to an RRSP at the beginning of every six months for 25 years, and then use the accumulated funds to purchase an annuity paying $2500 at the beginning of each month. How long after the start of the annuity will the last paymen

> Suppose that $5000 is contributed at the beginning of each year for 25 years to an RRSP that earns 10% compounded annually. By what percentage would annual contributions have to be increased in order to have the same future value after 25 years if the pl

> What amount is required to purchase an annuity that pays $4000 at the end of each quarter for the first five years and then pays $2500 at the beginning of each month for the subsequent 15 years? Assume that the annuity payments are based on a rate of ret

> Mick contributed $5000 at the beginning of each year for 25 years to his RRSP. Assume that the RRSP earned 8% compounded annually. What percentage of the RRSP’s value after 25 years comes from contributions made in the first five years?

> A Web site had 2 7 more hits last month than in the same month of the preceding year. If there were 2655 hits last month, how many were there one year earlier?

> A rental agreement requires the payment of $1000 at the beginning of each month. 1. What single payment at the beginning of the rental year should the landlord accept instead of 12 monthly payments if money is worth 8% compounded monthly? 2. Show that th

> Mr. and Mrs. Zolob contributed $50 on the first of each month to an RESP they set up for their grandson Jeff. By the time he entered Mohawk College, 14 years and 5 months of contributions had accumulated. The grandparents’ contributions stopped, and Jeff

> Ms. Bowers wants to be able to purchase a 20-year annuity at age 62 that will pay her $3500 at the beginning of each month. She makes her first quarterly contribution to an RRSP on her 35th birthday and continues them up to but not including her 62nd bir

> Calculate the future value of an investment plan requiring contributions of $800 at the beginning of each calendar quarter for seven years. Assume that the rate of return will be 8% compounded quarterly for the first 30 months and 7% compounded semiannua

> What minimum amount of money earning 7% compounded semiannually will sustain withdrawals of $1000 at the beginning of every month for 12 years?

> What will be the amount in an RRSP after 30 years if contributions of $4000 are made at the beginning of each year for the first 10 years, and contributions of $6000 are made at the beginning of each year for the subsequent 20 years? Assume that the RRSP

> What is the initial economic value of an annuity due if it consists of 19 semiannual payments of $1500? Money is worth 5% compounded semiannually for the first five years, and 6% compounded semiannually thereafter.

> Fred is about to have his 27th birthday. He has set a goal of retiring at age 58 with $1,000,000 in his RRSP. For planning purposes, he is assuming that his RRSP will earn 8% compounded annually. 1. What contributions on each birthday from age 27 to 57 i

> Sovereign Life Insurance Company of Canada offers $250,000 of term life insurance to a 45-year-old male for an annual premium of $716 (in advance) or for monthly premium payments (in advance) of $62.50 by preauthorized electronic debit. What effective ra

> If a furniture store offers to sell a washer-dryer combination priced at $1395 on a conditional sale contract requiring 12 monthly payments of $125 (including a payment on the date of sale), what effective rate of interest is being charged?

> Use N = L(1 – d1)(1 – d2)(1 – d3), to calculate L if N = $1468.80, d1 = 0.20, d2 = 0.15, and d3 = 0.10.

> As of the date of Colony Farm’s most recent financial statements, 3 1 2 years remained in the term of a lease reported as a long-term liability of $27,400. If the beginning-of-month lease payments are $750, what monthly compounded nominal discount rate w

> How many more RRSP contributions of $300 at the beginning of every month are required to reach $200,000 if the funds earn 7.5% compounded monthly than if they earn 8.5% compounded monthly?

> Apex Fabricating wants to accumulate $800,000 for an expansion expected to begin in four years. If today Apex makes the first of equal quarterly payments into a fund earning 6.75% compounded monthly, what should the size of these payments be?

> Excel Leasing calculates the payments on long-term equipment leases so that it earns a rate of return of 15% compounded quarterly on its investment in the equipment. What beginning-of-month payments will Excel charge on a four-year lease of a photocopier

> The membership dues at Shoreline Golf and Country Club are $2820 payable at the beginning of the year, or four payments of $736.56 payable at the beginning of each quarter. What effective rate of interest is the club charging members who pay their dues q

> Brunswick Trucking has signed a five-year lease with Ford Credit Canada Ltd. on a new truck. Lease payments of $1900 are made at the beginning of each month. To purchase the truck, Brunswick Trucking would have had to borrow funds at 6.25% compounded mon

> Calculate the future value of an ordinary annuity consisting of monthly payments of $300 for five years. The rate of return was 9% compounded monthly for the first two years, and will be 7.5% compounded monthly for the last three years.

> A 15-year loan requires month-end payments of $587.33 including interest at 8.4% compounded monthly. 1. What was the original amount of the loan? 2. What is the balance on the loan after half of the payments have been made?

> What minimum amount of money earning 2.5% compounded semiannually will sustain withdrawals of $1000 at the end of every month for 12 years?

> Dr. Wilson is buying a 50% ownership in a veterinary practice by end-of-month payments of $714.60, including interest at 7% compounded semiannually for 15 years. Rounded to the nearest dollar, 1. What valuation was placed on the partnership at the beginn

> Use NI = (CM)X – FC, to obtain X if NI = –$542.50, CM = $13.50, and FC = $18,970.