Unit 6

For a sum of money interested at 4% compounded semi-annually for 5 years.
the nominal annual rate of interest (j).
The number of compounding periods per year (m).
The periods rate of interest (i)
The number of compounding periods in the term (n)
The compounding factors (1+i)n
The numerical value of the compounding factors.
What is the nominal rate of interest compounded quarterly if the effective rate of interest on an investment is 5.3%?
How much will a registered retirement savings deposit of \$13 500.00 be worth in 11 years at 8.44% compounded quarterly? How much of the amount is interest?
To what future value will a principal of \$7100.00 amount in three years at 7.6% p.a. compounded:
Suppose \$4320.00 is invested for five years, eight months at 8.25% compounded annually. What is the compounded amount?
The Rob U Blind Bank advertises capital savings at 7.128% compounded semi-annually while Take Your Money Trust offers premium savings at 7.1% compounded monthly. Suppose you have \$4400.00 to invest for two years.
An investment of \$5000.00 earns interest at 6% p.a. compounded monthly for two years. At that time the interest rate is changed to 8% compounded semi-annually. How much will the accumulated value be three and a half years after the change?
Determine the proceeds of \$19 000 three years and three months before the due date if interest is 7.6% compounded semi-annually.
A debt can be repaid by payments of \$1000.00 today, and \$3000.00 in two years. What single payment would settle the debt three years from now if money is worth 16% p.a. compounded semi-annually?
Debts of \$400.00, \$450.00 and \$500.00 are due in one year, eighteen months and thirty months from now respectively. Determine the single payment now that would settle the debts if interest is 8% p.a. compounded quarterly.
Debts of \$850 due in six months, \$700 due in sixteen months, and \$1100 due in three years are to be settled by a single payment one year from now. What is the size of that single payment if interest is 7.5% compounded monthly?
Calculate the number of years for money to triple at 3.6% p.a. compounded monthly.
A loan of \$4500.00 was repaid together with interest of \$1164.00. If interest was 12 .4% compounded quarterly, for how many months was the loan taken out?

a) annually

b) semi-annually

c) quarterly

d) monthly

a) Which deposit will earn more interest?

b) What is the difference in the amount of interest?

Sample Solution