Question: Donia borrowed $7000 from her credit union

> A $75,000 mortgage loan at 9% compounded semiannually has a five-year term and a 25-year amortization. Prepayment of the loan at any time within the first five years leads to a penalty equal to the greater of 1. three months’ interest on the balance. 2.

> The Phams are almost two years into the first five-year term of a 25-year $80,000 mortgage loan at 7.5% compounded semiannually. Interest rates on three-year term mortgage loans are now 6% compounded semiannually. A job transfer necessitates the sale of

> Solve the equations. 12x – 4(2x – 1) = 6(x + 1) – 3

> You are interested in purchasing a house listed for $180,000. The owner seems quite determined to stay at the asking price, but you think that the true market value is $165,000. It may be that the owner would accept an offer whose nominal value is the ps

> The owner of a property listed at $145,000 is considering two offers. Offer C is for $140,000 cash. Offer M is for $50,000 cash and a mortgage back to the vendor for $100,000 at a rate of 8% compounded semiannually and payments of $750 per month for the

> What is the equivalent cash value of the offer if the vendor financing arrangement is for the same 10-year amortization but with 1. a five-year term? 2. a one-year term?

> A property is listed for $175,000. A potential purchaser makes an offer of $170,000, consisting of $75,000 cash and a $95,000 mortgage back to the vendor bearing interest at 8% compounded semiannually with monthly payments for a 10-year term and a 10-yea

> An investor is considering the purchase of an existing closed mortgage that was written 20 months ago to secure a $45,000 loan at 10% compounded semiannually paying $500 per month for a four-year term. What price should the investor pay for the mortgage

> The Gills have arranged a second mortgage loan with a face value of $21,500 at an interest rate of 6.5% compounded monthly. The face value is to be fully amortized by equal monthly payments over a five-year period. The Gills received only $20,000 of the

> If Gayle contributes $1000 to her RRSP at the end of every quarter for the next 10 years and then contributes $1000 at each month’s end for the subsequent 15 years, how much will she have in her RRSP at the end of the 25 years? Assume that the RRSP earns

> Canadian Pacific Class B preferred shares have just paid their quarterly $1.00 dividend and are trading on the Toronto Stock Exchange at $50. What will the price of the shares have to be three years from now for a current buyer of the shares to earn 7% c

> Interprovincial Distributors Ltd. is planning to open a distribution centre in Calgary in five years. It can purchase suitable land now for the distribution warehouse for $450,000. Annual taxes on the vacant land, payable at the end of each year, would b

> Mr. Palmer wants to retire in 20 years and purchase a 25-year annuity that will make end-of-quarter payments. The payment size is to be the amount which, 20 years from now, has the purchasing power of $6000 today. If he already has $54,000 in his RRSP, w

> Solve the equations. x – 0.025x = 341.25

> Natalie’s RRSP is currently worth $133,000. She plans to contribute for another seven years, and then let the plan continue to grow through internal earnings for an additional three years. If the RRSP earns 5.25% compounded annually, how much must she co

> What amount is required to purchase an annuity that pays $5000 at the end of each quarter for the first 10 years and then pays $2500 at the beginning of each month for the subsequent 10 years? The rate of return on the invested funds is 6% compounded qua

> Sheila already has $67,000 in her RRSP. How much longer must she contribute $4000 at the end of every six months to accumulate a total of $500,000 if the RRSP earns 5% compounded quarterly? (Round the time required to the next higher month.)

> Martha’s RRSP is currently worth $97,000. She plans to contribute $5000 at the beginning of every six months until she reaches age 58, 12 years from now. Then she intends to use half of the funds in the RRSP to purchase a 20-year annuity making month-end

> The monthly payments on a $30,000 loan at 10.5% compounded monthly were calculated to repay the loan over a 10-year period. After 32 payments were made, the borrower became unemployed and, with the approval of the lender, missed the next three payments.

> RentalTown advertised a television at a cash price of $599.99 and at a rent-to-own rate of $14.79 at the beginning of each week for 78 weeks. What effective rate of interest is a customer paying to acquire the television in a rent-to-own transaction? (As

> A major car manufacturer is developing a promotion offering new car buyers the choice between “below market” four-year financing at 1.9% compounded monthly or a cash rebate. On the purchase of a $35,000 car, what cash rebate would make a car buyer indiff

> Cynthia currently has $55,000 in her RRSP. She plans to contribute $7000 at the end of each year for the next 17 years and then use the accumulated funds to purchase a 20-year annuity making end-of-month payments. 1. Assume that her RRSP earns 8.75% comp

> Reg is developing a financial plan that would enable him to retire 30 years from now at age 60. Upon reaching age 60, he will use some of the funds in his RRSP to purchase an eight-year annuity that pays $5000 at the end of each month. Then, at age 68, h

> Patrick contributes $1000 at the beginning of every quarter to his RRSP. In addition, he contributes another $2000 to the RRSP each year from his year-end bonus. If the RRSP earns 9.5% compounded semiannually, what will be the value of his RRSP after 23

> Solve the equations. y = 192 + 0.04y

> For its “Tenth Anniversary Salebration,” Pioneer Furniture is offering terms of 10% down, no interest, and no payments for six months. The balance must then be paid in six equal payments, with the first payment due six months after the purchase date. The

> To compensate for the effects of inflation during their retirement years, the Pelyks intend to purchase a combination of annuities that will provide the following pattern of month-end income: Rounded to the nearest dollar, how much will they need in thei

> The average annual costs to support a child born today are estimated as follows: Years 1–6: $12,000 Years 7–12: 11,000 Years 13–17: 10,000 Years 18–19: 15,000 The costs in the early years include child care expenses or forgone earnings of the caregiving

> Jeanette wishes to retire in 30 years at age 55 with retirement savings that have the purchasing power of $300,000 in today’s dollars. 1. If the rate of inflation for the next 30 years is 2% per year, how much must she accumulate in her RRSP? 2. If she c

> Conrad has two loans outstanding, which he can repay at any time. He has just made the 11th monthly payment on an $8500 loan at 10.5% compounded monthly for a three-year term. The 22nd monthly payment of $313.69 was also made today on the second loan, wh

> It will cost A-1 Courier $1300 to convert a van from gasoline to natural gas fuel. The remaining useful life of the van is estimated at five years. To financially justify the conversion, what must be the reduction in the monthly cost of fuel to repay the

> Monthly payments were originally calculated to repay a $20,000 loan at 7% compounded monthly over a 10-year period. After one year, the debtor took advantage of an option in the loan contract to increase the loan payments by 15%. How much sooner will the

> Seth had accumulated Canada Student Loans totalling $5200 by the time he graduated from Mount Royal College in May. He arranged with the National Student Loans Service Centre to select the floating-rate option (at prime plus 2 1 2 % ), to capitalize the

> Kari had Canada Student Loans totalling $3800 when she completed her program at Niagara College in December. She had enough savings at the end of June to pay the interest that had accrued during the six-month grace period. Kari made arrangements with the

> Monica finished her program at New Brunswick Community College on June 3 with Canada Student Loans totalling $6800. She decided to capitalize the interest that accrued (at prime plus 2.5%) during the grace period. In addition to regular end-of-month paym

> Solve the equations. 1 3 ( x − 2 ) = 4

> Harjap completed his program at Nova Scotia Community College in December. On June 30, he paid all of the interest that had accrued (at prime plus 2.5%) on his $5800 Canada Student Loan during the six-month grace period. He selected the fixed-rate option

> Sarah’s Canada Student Loans totalled $9400 by the time she graduated from Georgian College in May. She arranged to capitalize the interest on November 30 and to begin monthly payments of $135 on December 31. Sarah elected the floating rate interest opti

> Bronwyn’s $15,000 line of credit is at prime plus 2.5%. The minimum payment (the greater of $100 or 3% of the combined principal and accrued interest) is automatically deducted from her chequing account on the 15th of each month. After the payment on Aug

> Benjamin has a $20,000 personal line of credit at prime plus 2% with his credit union. His minimum end-of-month payment is the greater of $100 or 3% of the combined principal and accrued interest. After his payment on April 30, his balance was $3046.33.

> Hercules Sports obtained a $60,000 operating line of credit on March 26. Interest charges at the rate of prime plus 3.5% were deducted from its chequing account on the 18th of each month. Hercules took an initial draw of $30,000 on March 31, when the pri

> Shoreline Yachts has a $1 million line of credit with the RBC Royal Bank, secured by its inventory of sailboats. Interest is charged at the floating (naturally!) rate of prime plus 2% on the 10th of each month. On February 10 (of a non–leap year), the lo

> Scotiabank approved a $75,000 line of credit for Curved Comfort Furniture on the security of its accounts receivable. Curved Comfort drew down $30,000 on October 7, another $15,000 on November 24, and $20,000 on December 23. The bank debited interest at

> On the June 12 interest payment date, the outstanding balance on Delta Nurseries’ revolving loan was $65,000. The floating interest rate on the loan stood at 6.25% on June 12, but rose to 6.5% on July 3, and to 7% on July 29. If Delta made principal paym

> McKenzie Wood Products negotiated a $200,000 revolving line of credit with the Bank of Montreal at prime plus 2%. On the 20th of each month, interest is calculated (up to but not including the 20th) and deducted from the company’s chequing account. If th

> 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

> 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?

> An investor is prepared to buy short-term promissory notes at a price that will provide him with a return on investment of 12%. What amount would he pay on August 9 for a 120-day note dated July 18 for $4100 with interest at 10.25%?

> 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%?