Simple & Compound Interest Questions and Answers

Look at the below amortization table Calculate the monthly payment round to nearest dollar 1 2 3 4 5 6 7 09 8 9 10 11 12 13 14 Month 1 2 3 5 6 7 8 9 10 11 12 2308 2309 6826 20877 B Principal Paid Interest Paid 554 20 554 84 559 49 562 16 564 84 567 53 570 24 572 96 575 69 578 48 581 19 583 96 1 754 55 1 751 91 1 749 26 1 746 59 1 743 91 1 741 22 1 738 51 1 735 79 1 733 03 1 730 32 1 727 56 1 724 79 27

Look at the below amortization table Calculate the total interest paid for year 1 round to nearest dollar T 2 3 4 5 6 7 8 9 10 11 12 13 14 Month Principal Paid Interest Paid 1 2 3 4 5 6 7 8 9 10 11 12 2308 20877 554 20 554 84 559 49 562 16 564 84 567 53 570 24 572 96 575 69 578 48 C 581 19 583 96 1 754 55 1 751 91 1 749 26 1 746 59 1 743 91 1 741 22 1 738 51 1 735 79 1 733 03 1 730 32 1 727 56 1 724 79

An investment of 42 000 was made by a business club The investment was split into three parts and lasted for one year The first part of the investment earned 8 interest the second 6 and the third 9 Total interest from the investments was 3480 The interest from the first investment was 6 times the interest from the second Find the amounts of the three parts of the investment The first part of the investment was The second part of the investment was The third part of the investment was

A p prt for t prt p r Answer t X

Consumer Products Interactive Disney recently reported segment operating income revenue and invested assets in millions as follows Invested Assets Media Networks 32 706 Parks and Resorts 28 275 Studio Entertainment 15 359 Consumer Products Interactive Media 5 528 9 332 a Use the DuPont formule to determine the return on investment for the four Disney segments Round Profit Margin and ROI to one decimal place and Investment Turnover to two decimal places Profit Margin Media Networks Parks and Resorts Studio Entertainment Consumer Products Interactive Media Profit Margin n Operating Income 7 755 3 298 2 703 1 965 Revenue 23 689 16 974 9 441 Investment Turnover Investment Turnover X X ROI

10 Jean Poole wants to purchase a home for 487 850 and plans to make a down payment of 13 A lender offers her a rate of 2 8 compounded semi annually amortized over 25 years Show the work to calculate the down payment on this situation 2 marks a b C d e Show the work to calculate the total amount to be mortgaged 2 marks What are the monthly payments Hint Use amount to be mortgaged Calculate the total amount paid when the mortgage is over How much interest was paid over the duration of the mortgage 2 marks 1 mark 2 marks

3 This amortization table shows the first 3 payments and the last 3 payments on mortgage Payment Monthly number payment 0 1 2 3 238 239 240 1343 20 1343 20 1343 20 1343 20 1343 20 1343 20 Interest Principal paid paid 976 66 974 67 972 67 21 63 14 46 7 25 366 55 368 53 370 53 b How much interest is paid 1321 57 1328 74 1335 95 a What is the total amount paid on the mortgage Outstanding balance 180 000 00 179 633 45 179 264 92 178 894 39 2664 70 1335 95 0 00

Reminder of the Equations you need to know FOR SIMPLE INTEREST I I pxrxt FUTURE VALUE OF AN ANNUITY F R 1 1 i 1 For COMPOUND INTEREST A P 1 i PRESENT VALUE OF AN ANNUITY R1 1 1 1 1 i PVR PRESENT and FUTURE VALUE CALCULATOR 1 Sue decided to invest the 1500 in savings from her part time job into a 6 month short term investment account at the bank The account earns 4 5 simple interest per year Show your work by hand a What is the accumulated amount of the investment at the end of the 6 months Interest Principal K 13 b How much simple interest was earned A 2 2 After working all summer Ryan plans on investing a portion of his savings to purchase a car in 3 years Determine the amount of summer savings he should invest now at an interest rate of 5 4 compounded semi annually if he wants to K 4 hand

8 A new car is purchased at a cost of 25000 The value of the car deprecia rate of 30 per year C 13 T a Write an equation to represent the value of the car after n years b What is the value of the car after 3 years c What is the value of the car after 6 years 3

Able Development is currently considering a project that will produce cash inflows of 40 000 a year for 10 years The cost of the project is 200 000 What is the profitability index if the discount rate is 12 percent 1 13 1 4126 4 0

1 You have decided to accept an offer from your parents of a loan to finance your new car The amount you have budgeted for is 15000 over 42 months Your parents decided to charge a reasonable SIMPLE INTEREST rate of 2 5 per year How many years is 42 months 4 2 4 3 5 2 You have decided to accept an offer from your parents of a loan to finance your new car The amount you have budgeted for is 15000 over 42 months Your parents decided to charge a reasonable SIMPLE INTEREST rate of 2 5 per year What is 2 5 as a decimal 0 025 0 25 I 131250 F 0 0025 3 You have decided to accept an offer from your parents of a loan to finance your new car The amount you have budgeted for is 15000 over 42 months Your parents decided to charge a reasonable SIMPLE INTEREST rate of 2 5 per year How much interest do you owe your parents at the end of the 42 months 1575

to the nearest cent 1 a If you invest 2900 at the end of every six months in an account that pays 5 a compounded semi annually how much will you have earned after 7 years TVM solver https www fncalculator com financialcalculator type tvmAdvanced Calculator

At the start of your post secondary education your parents invest 12000 in an account that pays 6 5 a compounded weekly How much can you withdraw from the account at the end of every we ek while you are in school over the next 4 years

Find the derivative f x a f x Ob f x C 4x 2x 5 5x4 4x 3x 1 12x 4x 4x 2x 5 5x4 4x 3x 1 f x 12x 4x 5x4 4x 3x 1 4x 2x 5 20x 12x 6x 5x4 4x3 3x 1 12x 4x 4x 2x 5

What single cash payment is equivalent to payments of 3500 every six months at 7 compounded quarterly if the payments are made at the end of every six months for fifteen years

Learning Goal from Lesson 6 1 I can compute the sales tax Find the sales tax and total purchase price 2 points Clarissa Byrne purchased a 399 99 electronic organizer 78 94 in office supplies and a 98 95 office chair for work Clarissa lives in New Orleans Louisiana where the state tax is 4 and the city tax is 4 What is the a total sales tax and b total price 1 Learning Goal from Lesson 6 2 How I Did Circle one I can calculate the total purchase price I got it I m still learning it How I Did Circle one I got it I m still learning it

The Sisyphean Company has a bond outstanding with a face value of 1 000 that reaches maturity in five years The bond certificate indicates that the stated coupon rate for this bond is 8 1 and that the coupon payments are to be made semiannually Assuming that this bond trades for 960 then what is the YTM for this bond is closest to 9 6 10 72 8 85 9 11

Four years ago your firm bought an asset that is being depreciated on a straight line basis to zero over a 5 year life The asset cost 175 000 and is being sold for 10 000 today The tax rate is 35 What is the after tax cash flow from the sale of the asset

9 10 similar to Part 2 of 2 HW Score 60 12 of 20 points Points 0 5 of 1 Related to Checkpoint 9 3 Bond valuation Doisneau 25 year bonds have an annual coupon interest of 11 percent make interest payments on a semiannual basis and have a 1 000 par value If the bonds are trading with a market s required yield to matu percent are these premium or discount bonds Explain your answer What is the price of the bonds a If the bonds are trading with a yield to maturity of 15 then Select the best choice below A there is not enough information to judge the value of the bonds OB the bonds should be selling at a premium because the bond s coupon rate is greater than the yield to maturity of similar bonds C the bonds should be selling at a discount because the bond s coupon rate is less than the yield to maturity of similar bonds OD the bonds should be selling at par because the bond s coupon rate is equal to the yield to maturity of similar bonds b The price of the bonds is Round to the nearest cent

HW Score 60 12 of 20 points Related to Checkpoint 9 1 Floating rate loans The Bensington Glass Company entered into a loan agreement with the firm s bank to finance the firm s working capital The loan called for a floating rate that was 29 basis points 0 29 percent over an index ba Points 0 of 1 LIBOR In addition the loan adjusted weekly based on the closing value of the index for the previous week and had a maximum annual rate of 2 18 percent and a minimum of 1 79 percent Calculate the rate of interest for weeks 2 through 10 Date Week 1 Week 2 Week 3 Week 4 Week 5 Week 6 Week 7 Week 8 Week 9 LIBOR 1 92 1 62 1 49 1 37 1 59 1 65 1 69 1 86 1 85 The rate of interest for week 2 is 2 18 Round to two decimal places The rate of interest for week 3 is Round to two decimal places Part 2 of 9 to BETER O

2 Calculate the regular deposit for each annuity so the deposits accumulate to the given amount on the date of the last deposit Each deposit is made at the end of the compounding period 4 marks a 1575 in 5 years at 4 compounded semi annually b 7500 in 7 5 years at 5 5 compounded monthly

PV PMT ORD IY CY 1 CY 1 DPP 1 i PF 1 NCY x Years PV DUE PMT CY 1 PP CY 1 1 PP 1 ATTARE CY X 1 1 PY 4 marks Calculate the amount of each annuity on the date of the last deposit a A deposit of 500 at the end of each quarter for 10 years at 4 8 compounded quarterly MASUK BE BEAU deposit of 20 at the end of each month for 15 years at 7 2 compounded monthly

Question 1 Pedro has a tax free savings account TFSA with a balance of 5000 00 Interest is earned at a rate of 4 00 compounded monthly If Pedro contributes 400 00 to the TFSA at the end of every month how long will it take him to save 20 000 00 Show your work 2 marks

Kiara paid off her student loan in 3 years by making payments of 800 at the beginning of every month The interest rate on his loan was 4 40 compounded monthly a Calculate the size of the original loan Round to the nearest cent a Calculate the size of the original loan Round to the nearest cent

The total purchase price of a new home entertainment system is 14 210 If the down payment is 2500 and the balance is to be financed over 60 months at 7 add on interem what is the monthly payment The monthly payment is S GULD

In the last 6 years the population of Manchester England has grown at a rate of 0 8 per year to 530 300 If this rate continues what will be the population in 15 more years Round your answer to the nearest whole number

Week 1 2 Value 18 13 Using the naive method most recent value as the forecast for the next week compute the following measures of forecast accuracy a Mean absolute error If required round your answer to one decimal place 3 15 4 5 6 11 19 15 b Mean squared error If required round your answer to one decimal place c Mean absolute percentage error If required round your intermediate calculations and final answer to two decimal places d What is the forecast for week 7

Pierre inherited 440 000 from his uncle and decided to invest the money He put part of the money in a money market account that earns 2 5 simple interest The remaining money was invested in a stock that returned 3 in the first year and a mutual fund that lost 2 in the first year He invested 10 000 more in the stock than in th mutual fund and his net gain for 1 yr was 2500 Determine the amount invested in each account

Write the system of equations only Do not solve An investment firm recommends that a client invest in bonds rated AAA A and B The average yield on AAA bonds is 4 on A bonds 8 and on B bonds 12 The client wants to invest twice as much in A bonds as in B bonds How much should be invested in each type of bond if the total investment is 24 000 and the investor wants an annual return of 1740 on the three investments Let x be the number of AAA bonds y the number of A bonds and z the number of B bonds Ox y z 24 000 4x 8y 12z 174 000 y 2z 0 Ox y z 24 000 4x 8y 12z 17 400 y 2z 0 O x y z 24 000 4x 8y 12z 174 000 2y z 0 O x y z 24 000 4x 8y 12z 174 000 x 2z 0

Question 4 Joe and his partners have contracted to purchase the franchise rights worth 78 000 to open and operate a specialty pizza restaurant called Pepperoni s With a renewable agreement the partners have agreed to make payments at the beginning of every month for three years To accommodate the renovation period Pepperoni s corporate office has agreed to allow the payments to start in one year with interest at 8 49 compounded semi annually What is the amount of each payment

You purchase a used car for 8 000 with a loan at 2 4 monthly payments Find the Payment and how much interest is payed if the loan is a 2 years b 3 years c 4 years d 5 years e 6 years f 7 years

A bank offers a CD that pays a simple interest rate of 9 5 How much must you put in this CD now in order to have 1 000 for a home entertainment center in 6 years The present value that must be invested to get 1 000 after 6 years at an interest rate of 9 5 is the nearest cent Round up to

Parents wish to have 120 000 available for a child s education If the child is now 5 years old how much money must be set aside at 6 compounded semiannually to meet their financial goal when the child is 18 Click the icon to view some finance formulas The amount that should be set aside is 66460 Round up to the nearest dollar

Warnock Inc is considering a project that has the following cash flow and WACC data What is the project s NPV Note that a project s projected NPV can be negative in which case it will be rejected 10 00 WACC Year Cash flows O a 47 38 O b 40 27 C 39 09 d 29 61 OO e 39 48 0 1 050 1 500 2 400 3 300

Maxwell Feed Seed is considering a project that has the following cash flow data What is the project s IRR Note that a project s projected IRR can be less han the WACC and even negative in which case it will be rejected Year Cash flows Oa 13 74 b 15 45 O c 17 17 Od 15 61 e 12 96 0 6 750 1 2 000 2 2 025 3 2 050 4 2 075 5 2 100

Masulis Inc is considering a project that has the following cash flow and WACC data What is the project s discounted payback WACC Year Cash flows a 2 14 years O b 1 95 years O c 1 86 years O d 2 25 years Oe 2 40 years 0 925 10 00 1 525 2 485 3 445 4 405

Warr Company is considering a project that has the following cash flow data What is the project s IRR Note that a project s projected IRR can be less than the WACC or negative in both cases it will be rejected 1 400 D Year Cash flows a 0 99 Ob 3 58 O c 1 22 d 4 13 e 1 547 0 1540 2 400 3 400 4 400

Barry Company is considering a project that has the following cash flow and WACC data What is the project s NPV Note that a project s projected NPV can b negative in which case it will be rejected WACC Year Cash flows 11 75 a 286 36 b 349 36 C 294 95 OO d 355 08 e 309 27 0 1 100 1 400 2 390 3 380 4 370 5 360

Stern Associates is considering a project that has the following cash flow data What is the project s payback Year Cash flows Oa 2 42 years Ob 3 83 years c 3 14 years O d 3 61 years Oe 2 54 years 0 975 1 300 2 310 3 320 4 330 5 340

In order to start a small business a student takes out a simple interest loan for 5000 00 for 9 months at a rate of 9 25 a How much interest must the student pay b Find the future value of the loan a The amount of interest is Round to the nearest cent as needed

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Annuity payments Calvin Johnson has a 4 500 debt balance on his Visa card that charges 12 9 percent APR compounded monthly In 2009 Calvin s minimum monthly payment is 2 percent of his debt balance which is 90 How many months round up will it take Calvin Johnson to pay off his credit card if he pays the current minimum payment of 90 at the end of each month In 2010 as the result of a federal mandate the minimum monthly payment on credit cards rose to 3 percent If Calvin made monthly payments of 135 at the end of each month how long would it take to pay off his credit card a If Calvin made monthly payments of 90 at the end of each month how long would it take to pay off his credit card months Round up to the nearest unit b If Calvin made monthly payments of 135 at the end of each month how long would it take to pay off his credit card months Round up to the nearest unit GEOED

You have taken a loan of 75 000 00 for 23 years at 5 8 compounded quarterly Fill in the table below Round all answers to 2 decimal places Payment number Payment amount Principal Amount Interest 0 1 N DL S S Balance 75 000 00

Saving for retirement future value of an annuity Selma and Patty Bouvier are twins and both work at the Springfield DMV Selma and Patty Bouvier decide to save for retirement which is 35 years away They ll both receive an annual return of 7 percent on the nvestment over the next 35 years Selma invests 2 000 per year at the end of each year only for the first 10 years of the 35 year period for a total of 20 000 saved Patty doesn t start saving for 10 years and then saves 2 000 per year at the end of each year for remaining 25 years for a total of 50 000 saved How much will each of them have when they retire a How much will Selma have when she retires Round to the nearest cent b How much will Patty have when she retires Round to the nearest cent This question 2 point s possible REED

Question 20 of 20 a If the annual discount rate is 11 percent the present value of the annuity due is S b If the annual discount rate is 16 percent the present value of the annuity due is S Present value of an annuity due Determine the present value of an annuity due of 1 000 per year for 25 years discounted back to the present at an annual rate of 11 percent What would be the present value of this annuity due if it were discou percent Round to the nearest cent Round to the nearest cent This quiz 40 point s possible This question 2 point s possible GEXED G

Led to Checkpoint 6 1 Future value of an annuity Imagine that Homer Simpson actually invested the 120 000 he earned providing Mr Burns entertainment 7 years ago at 8 percent annual interest and that he starts investing an additional 1 900 a year today and eginning of each year for 20 years at the same 8 percent annual rate How much money will Homer have 20 years from today amount of money Homer will have 20 years from now is S Round to the nearest cent GILB

formula to determine the periodic deposit b How much of the financial goal comes from deposits and how much comes from interest Periodic Deposit at the end of each year 7 compounded annually Click the icon to view some finance formulas Rate KIDD Time 18 years Financial Goal 160 000 a The periodic deposit is Do not round until the final answer Then round up to the nearest dollar as needed

You deposit 3000 in an account earning 3 interest compounded monthly How much will you have in the account in 5 years

Question 14 P6 52 similar to O Points 0 of 1 Present value of complex cash flows How much do you have to deposit today so that beginning 11 years from now you can withdraw 15 000 a year for the next 7 years periods 11 through 17 plus an additional amount of 30 000 in the last year period 17 Assume interest rate of 11 percent gnment The amount of money you have to deposit today is Round to the nearest cent EXTE Sav