Question: An investor is prepared to buy short-

> Mr. Michaluk has a $50,000 personal (revolving) line of credit with the Canadian Imperial Bank of Commerce (CIBC). The loan is on a demand basis at a floating rate of prime plus 1.5%. On the 15th of each month, a payment equal to the greater of $100 or 3

> Solve the equations. 0.5(x – 3) = 20

> Dr. Chan obtained a $15,000 demand loan at prime plus 1.5% on September 13 from the Bank of Montreal to purchase a new dental X-ray machine. Fixed payments of $700 will be deducted from the dentist’s chequing account on the 20th of each month, beginning

> Beth borrowed $5000 on demand from TD Canada Trust on February 23 for an RRSP (Registered Retirement Savings Plan) contribution. Because she used the loan proceeds to purchase the bank’s mutual funds for her RRSP, she received a special interest rate of

> Donia borrowed $7000 from her credit union on a demand loan on July 20 to purchase a motorcycle. The terms of the loan require fixed monthly payments of $1400 on the first day of each month, beginning September 1. The floating rate on the loan is prime p

> Giovando, Lindstrom & Co. obtained a $6000 demand loan at prime plus 1.5% on April 1 to purchase new office furniture. The company agreed to fixed monthly payments of $1000 on the first of each month, beginning May 1. Calculate the total interest charges

> A $5000 demand loan was advanced on June 3. Fixed monthly payments of $1000 were required on the first day of each month beginning July 1. Prepare the full repayment schedule for the loan. Assume that the interest rate remained at 8.75% for the life of t

> Dr. Robillard obtained a $75,000 operating line of credit at prime plus 3%. Accrued interest up to but not including the last day of the month is deducted from his bank account on the last day of each month. On February 5 (of a leap year) he received the

> Anthony borrowed $7500 on September 15 and agreed to repay the loan by three equal payments on the following November 10, December 30, and February 28. Calculate the payment size if the interest rate on the loan was 11 3 4 % . Use September 15 as the foc

> A loan of $4000 at 6.25% is to be repaid by three equal payments due four, six, and eight months after the date on which the money was advanced. Calculate the amount of each payment. Use the loan date as the focal date.

> A loan of $10,000 is to be repaid by three payments of $2500 due in two, four, and six months, and a fourth payment due in eight months. What should be the size of the fourth payment if an interest rate of 11% is charged on the loan? Use today as the foc

> Maurice borrowed $6000 from Heidi on April 23 and agreed to make payments of $2000 on June 1 and $2000 on August 1, and to pay the balance on October 1. If simple interest at the rate of 5% was charged on the loan, what is the amount of the third payment

> Solve the equations. x 1 + 0.115 × 78 365 + 3 x ( 1 + 0.115 × 121 365 ) = $1000 ( 1 + 0.115 × 43 365 )

> A $7500 loan will be paid off by four equal payments to be made 2, 5, 9, and 12 months after the date of the loan. What is the amount of each payment if the interest rate on the loan is 9.9%?

> The simple interest rate on a $5000 loan is 7%. The loan is to be repaid by four equal payments on dates 100, 150, 200, and 250 days from the date on which the loan was advanced. What is the amount of each payment?

> $8000 was borrowed at an interest rate of 11 1 2 % . Calculate the amount of each payment if the loan was paid off by three equal payments made 30, 90, and 150 days after the date of the loan.

> What should be the amount of each payment if a $2500 loan at 3.5% is to be repaid by three equal payments due two months, four months, and seven months following the date of the loan?

> If the S&P/TSX Composite Index declined from 14,614 to 14,238 over a 50-day period, what were the simple and effective annualized rates of decline in the index during the period?

> If the money supply increased from $331.12 billion to $333.81 billion in a single month, what were the simple and effective annualized rates of increase in the money supply during the month?

> 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?

> If the Consumer Price Index rose by 0.5% over a two-month period, what were the simple and effective annualized rates of inflation during the two-month period?

> An income tax preparation service discounts income tax refunds at the statutory maximum amount of 15% on the first $300. For example, a taxpayer eligible for a $200 tax refund can sell the refund to the discounter for immediate payment of $170. What is t

> The terms of payment on an invoice are 3/10, n/90. What are the simple and effective annualized rates of return earned by taking the cash discount on the last day of the discount period instead of paying the full price on the last day of the credit perio

> Solve the equations. x ( 1 + 0.095 × 84 365 ) + 2 x 1 + 0.095 × 108 365 = $1160.20

> 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?

> 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?

> If the holding-period return on a money market mutual fund for the most recent seven days is 0.097%, what current (simple) and effective annualized yields will be quoted for the fund in the financial media?

> If the holding-period return on a money market mutual fund for the most recent seven days is 0.081%, what current (simple) yield and effective annualized yield will be quoted for the fund in the financial media?

> Danielle’s shares in the Industrial Growth Fund, an equity mutual fund, dropped in price from $12.86 to $12.56 over a three-month period. What were the simple and effective annualized rates of return during the period?

> Neil’s common stock portfolio increased in value over a two-month period from $78,900 to $84,300. What were the simple and effective annualized rates of total return over the period??

> A T-bill with 125 days remaining to maturity is discounted to yield 4.6% simple interest. What is the effective annualized rate of return on the T-bill?

> A bank pays a simple interest rate of 4.1% on 30-day to 179-day GICs of at least $100,000. What is the effective annualized rate of return 1. on a 40-day GIC? 2. on a 160-day GIC?

> 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 (compounded) increase for the entire year?

> What is the percent rate if a quantity is four times the size of the base?

> Solve the equations. x ( 1.05 ) 3 + $1000 + x 1.05 7 = $5000 1.05 2

> In what circumstance should you calculate a weighted average instead of a simple average?

> How must you allocate your money among a number of investments so that your portfolio’s overall rate of return will be the same as the simple average of the rates of return on individual investments?

> In what circumstance is the weighted average equal to the simple average?

> Calculate the missing values for the promissory notes described. Issue date = ? Term = 4 months Legal due date = Feb 28

> 1. If you want four-figure accuracy in your final result, what minimum number of figures must be retained in the values used in the calculations? A) 4 B) 5 C) 6 2. For a final result of approximately $7000 to be accurate to the cent, what minimum number

> Calculate the missing values for the promissory notes described. Issue date = Nov 14 Term = ? Legal due date = Jan 31

> If you are firmly convinced that prevailing interest rates will decline, how should you change the relative weighting of short-term and long-term bonds in your bond portfolio?

> Calculate the missing values for the promissory notes described. Issue date = July 6 Term = ? Legal due date = Oct 17

> On a recent interest payment date, a bond’s price exceeded its face value. If the prevailing market rate of return does not change thereafter, will the bond’s premium be different on later interest payment dates? Explain.

> Calculate the missing values for the promissory notes described. Issue date = June 30 Term = 90 days Legal due date = ?

> Solve the equations. 2 x 1.03 7 + x + x ( 1.03 ) 10 = $1000 + $2000 1.03 4

> Assuming that the bond issuer does not default on any payments, is it possible to lose money on a bond investment? Discuss briefly.

> Calculate the missing values for the promissory notes described. Issue date = May 19 Term = 120 days Legal due date = ?

> Under what circumstance can you realize a capital gain on a bond investment?

> Name four variables that affect a bond’s price. Which ones, if any, have an inverse effect on the bond’s price? That is, for which variables does a lower value of the variable result in a higher bond price?

> A six-month note dated June 30 for $2900 bears interest at 13.5%. Determine the proceeds of the note if it is discounted at 9.75% on September 1.

> The calculated monthly payment on a loan amortized over 10 years is rounded down by 0.3 cents to get to the nearest cent. 1. Will the adjusted final payment be more than or less than the regular payment? 2. Will the difference between the regular and the

> The payee on a three-month $2700 note earning interest at 8% wishes to sell the note to raise some cash. What price should she be prepared to accept for the note (dated May 19) on June 5 in order to yield the purchaser an 11% rate of return?

> The calculated monthly payment on a loan amortized over five years is rounded up by 0.2 cents to get to the nearest cent. 1. Will the adjusted final payment be more than or less than the regular payment? 2. Will the difference between the regular and the

> A 100-day $750 note with interest at 12.5% was written on July 15. The maker approaches the payee on August 10 to propose an early settlement. What amount should the payee be willing to accept on August 10 if short-term investments can earn 8.25%?

> Solve the equations. 3 x 1.025 6 + x ( 1.025 ) 8 = $2641.35

> Jasper Ski Corp. is studying the feasibility of installing a new chair lift to expand the capacity of its downhill-skiing operation. Site preparation would require the expenditure of $1,900,000 at the beginning of the first year. Construction would take

> Classifying individual costs as either purely fixed or purely variable can be problematic, especially when a firm produces more than one product. Rather than determining FC and VC by analyzing each cost, you can use an income statement approach for estim

> If the loan payments and interest rate remain unchanged, will it take longer to reduce a loan’s balance from $20,000 to $10,000 than to reduce the balance from $10,000 to $0? Explain briefly.

> A six-month non-interest-bearing note issued on September 30, 2019 for $3300 was discounted at 11.25% on December 1. What were the proceeds of the note?

> Will a loan’s balance midway through its amortization period be (pick one): (i) more than, (ii) less than, or (iii) equal to half of the original principal? Explain.

> A 90-day non-interest-bearing note for $3300 is dated August 1. What would be a fair selling price of the note on September 1 if money can earn 7.75%?

> Will the market value of a perpetual preferred share (paying a fixed periodic dividend) rise or fall if the rate of return (dividend yield) required by investors declines? Give a brief explanation.

> Calculate the maturity value of a $1000 face value, five-month note dated December 31, 2019, and bearing interest at 9.5%.

> If market interest rates rise, will it require a larger endowment to sustain a perpetuity with a particular payment size? Give a brief explanation.

> Calculate the maturity value of a 120-day, $1000 face value note dated November 30, 2020, and earning interest at 10.75%.

> A perpetuity and an annuity both have the same values for PMT and i. Which has the larger present value? Give a brief explanation.

> Determine the legal due date for: 1. A four-month note dated April 30, 2019. 2. A 120-day note issued April 30, 2019.

> Solve the equations. 29 – 4y = 2y – 7

> For the same n, PMT, and i, is the present value of a deferred annuity larger or smaller than the present value of an ordinary annuity? Explain.

> Determine the legal due date for: 1. A five-month note dated September 29, 2019. 2. A 150-day note issued September 29, 2019.

> 1. How long is the period of deferral if the first quarterly payment of a deferred ordinary annuity will be paid 3 1 2 years from today? 2. How long is the deferral period if the first quarterly payment of a deferred annuity due will be paid 3 1 2 years

> Calculate the missing values for the promissory notes described. Face value ($) = 4000 Issue date = Nov 30 Interest rate (%) = 8 Term = 75 days Date of Sale = Jan 1 Discount Rate (%) = ? Proceeds = 4015.25

> The term of the lease on a vehicle is about to expire. Answer parts (a) and (b) strictly on financial considerations. 1. If the market value of the vehicle is less than the residual value, what should the lessee do? 2. If the market value of the vehicle

> Calculate the missing values for the promissory notes described. Face value ($) = 9000 Issue date = July 28 Interest rate (%) = 8 Term = 91 days Date of Sale = Sept 1 Discount Rate (%) = ? Proceeds = 9075.40

> An ordinary annuity and an annuity due have the same present value, n, and i. Which annuity has the smaller payment? Give the reason for your answer.

> Calculate the missing values for the promissory notes described. Face value ($) = 3500 Issue date = Oct 25 Interest rate (%) = 10 Term = 120 days Date of Sale = Dec 14 Discount Rate (%) = 8 Proceeds = ?

> An ordinary annuity and an annuity due have the same future value, n, and i. Which annuity has the larger payment? Give the reason for your answer.

> Calculate the missing values for the promissory notes described. Face value ($) = 2700 Issue date = Sept 4 Interest rate (%) = 10 Term = 182 days Date of Sale = Dec 14 Discount Rate (%) = 12 Proceeds = ?

> Solve the equations. x 1.1 2 + 2 x ( 1.1 ) 3 = $1000

> Other factors being equal, is the PV of an annuity due larger if the given nominal discount rate is compounded monthly instead of annually? Explain briefly.

> Calculate the missing values for the promissory notes described. Face value ($) = 6000 Issue date = May 17 Interest rate (%) = 0 Term = 3 months Date of Sale = June 17 Discount Rate (%) = 9 Proceeds =?

> If the periodic interest rate for a payment interval is 3%, by what percentage will PV(due) exceed PV?

> Calculate the missing values for the promissory notes described. Face value ($) = 1000 Issue date = March 30 Interest rate (%) = 0 Term = 50 days Date of Sale = April 8 Discount Rate (%) = 10 Proceeds = ?

> Other things being equal, why is the present value of an annuity due larger than the present value of an ordinary annuity?

> Calculate the missing values for the promissory notes described. Issue date = March 30 Face value ($) = 9400 Term = ? Interest rate (%) = 9.90 Maturity value ($) = 9560.62

> For the present value of an annuity due, where is the focal date located relative to the first payment?

> Calculate the missing values for the promissory notes described. Issue date = Dec 31 Face value ($) = 5200 Term = ? Interest rate (%) = 11.00 Maturity value ($) = 5275.22

> Other things being equal, why is the future value of an annuity due larger than the future value of an ordinary annuity?

> Calculate the missing values for the promissory notes described. Issue date = Nov 5 Face value ($) = 4350 Term = 75 days Interest rate (%) = ? Maturity value ($) = 4445.28

> Solve the equations. 12x − 4x(1.06)4 = $1800

> For the future value of an annuity due, where is the focal date located relative to the final payment?

> Calculate the missing values for the promissory notes described. Issue date = Jan 22 Face value ($) = 6200 Term = 120 days Interest rate (%) = ? Maturity value ($) = 6388.04

> Give three examples of an annuity due.

> Calculate the missing values for the promissory notes described. Issue date = Aug 31 Face value ($) = ? Term = 3 months Interest rate (%) = 7.50 Maturity value ($) = 7644.86

> If you contribute $250 per month to an RRSP instead of $500 per month, will the time required to reach a particular savings target be (pick one): (i) twice as long? (ii) less than twice as long? (iii) more than twice as long? Give the reasoning for your

> Calculate the missing values for the promissory notes described. Issue date = July 3 Face value ($) = ? Term = 90 days Interest rate (%) = 10.20 Maturity value ($) = 2667.57

> If you double the size of the monthly payment you make on a loan, will you pay it off in (pick one): (i) half the time? (ii) less than half the time? (iii) more than half the time? Give the reasoning for your choice.

> Calculate the missing values for the promissory notes described. Issue date = Feb 15 Face value ($) = 3300 Term = 60 days Interest rate (%) = 8.75 Maturity value ($) = ?

> You intend to accumulate $100,000 in 10 years instead of 20 years by making equal monthly investment contributions. Will the monthly contribution for a 10-year plan be: (i) Twice the monthly contribution for a 20-year plan? (ii) Less than twice the month