Compound Interest
Determine the present value and the compound discount of$4000 due in seven years and six months if interest is 8.8% compounded quarterly.
PV=$2082 , CI=$1918
At what nominal annual rate of interest will money double itself in 6 years and 9 months if compounded quarterly?
10.4%
Calculate the present value of payments of $375 made at the end of every 6 months for 15 years if money is worth 7% compounded semi-annually.
$6897.02
A $25OOO, 9% bond with interest payable quarterly is redeemable at par in six years. What is the purchase price to yield 8.25% compounded annually?
$26174.35
Bruce and Carol want to sell their business. They have received two offers. If they accept offer A, they will receive $15OOO immediately and $20 OOO in three years. If they accept Offer B, they will receive $3000 now and $3000 at the end of every six months for six years. If interest is 8%, which offer is preferable?
$30 876.65; $31 281.27; at 8%, Offer B is preferred because they will receive a higher value for their business today
A note dated July 1, 2017, promises to pay $8000 with interest at 7% compounded quarterly on January 1, 2026. Determine the proceeds from the sale of the note on July 1, 2021, if money is then worth 8% compounded semi-annually
PV (July 1,2021)=$10138.186
If $1100 accumulates to $1350 in 4 years and 6 months compounded semi-annually, what is the effective annual rate of interest?
4.666%
To purchase equipment for his business, Ted paid $400 down and signed an instalment contract that required payments of $69 .33 at the end of each month for three years. Suppose interest is 10.8% compounded monthly.
1. What was the cash price of the equipment?
2. How much was the cost of financing?
1. $2523.82
2. $ 372.06
A $100 OOO, 13% bond with semi-annual interest payments redeemable at par on July 15, 2026, is bought on September 10, 2019, at 102.625. What was the approximate yield rate?
12.4614%
A contract is estimated to yield net returns of $3500 quarterly for seven years. To secure the contract, an immediate outlay of $50 OOO and a further outlay of $30 OOO three years from now are required. Interest is 12% compounded quarterly.(
-$5367; the investment should be rejected.
A debt can be repaid by payments of$4000 today, $4000 in five years, and $3000 in six years. What single payment would settle the debt one year from now if money is worth 7% compounded semi-annually?
$9449.3
Calculate the nominal annual rate of interest compounded quarterly that is equal to an effective rate of 9.25%.
8.95%
If Gary accumulated $5700 in his savings account over five years, how much did he deposit at the beginning of every month if interest is 4.32% compounded monthly?
$84.97
A $5000 bond redeemable at par in seven years and four months, bearing interest at 6.5% payable semi-annually, is bought to yield 7.5% compounded semi-annually. Determine
a. the cash price;
b. the accrued interest;
c. the quoted price.
a. $4775.36
b. $54.17
c. $4721.19
A telephone system with a disposable value of$1200 after five years can be purchased for $6600. Alternatively, a leasing agreement is available that requires an immediate payment of $1500, plus payments of $100 at the beginning of each month for five years. If money is worth 12% compounded monthly, should the telephone system be leased or purchased?
The company should purchase because it would be cheaper by $$424 than leasing.
A loan of $2000 was repaid together with interest of $604.35. If interest was 8% compounded quarterly, for how many months was the loan taken out?
40 months
A debt of$12 OOO was replaced with two payments. If$7500 was paid in two years, when should a second payment of$7500 be made if interest compounds at 8% quarterly?
3.69 years
A debt of$2290 is repaid by making payments of$198. If interest is 16.95% compounded monthly, for how long will quarterly payments have to be made?
4 Years , 3months
A $5000, 4% bond with interest payable annually, redeemable at par in seven years, is purchased to yield 4.75% compounded annually. Calculate the premium or discount and the purchase price, and construct the appropriate bond schedule.
A real estate development project requires annual outlays of $75 OOO for 8 years. Net cash inflows beginning in Year 9 are expected to be $250000 per year for 15 years. If the developer requires a rate of return of 18%, compute the net present value of the project. Determine whether the company should undertake the project.
-$22,227
What is the size of the equal payments that must be made at the end of each of the next five years to settle a debt of $5000 due in five years, if money is worth 9% compounded annually?
$835.46
Calvin Jones bought his neighbour's farm for $100000 down and payments of $5000 at the end of every 3 months for 10 years. If the payments are deferred for 2 years and interest is 8% compounded quarterly, what was the purchase price of the farm?
$216738.19
Agate Marketing Inc. intends to distribute a new product. It is expected to produce net returns of $15 OOO per year for the first four years and $10 OOO per year for the following three years. The facilities required to distribute the product will cost $36 OOO, with a disposal value of $9000 after seven years. The facilities will require a major facelift costing $10 OOO each after three years and after five years. If Agate requires a return on investment of 20%, should the company distribute the new product?
$5696; the new product provides the required return on investment of 20% and therefore should be distributed.