Chapter 11_More excercise_BUQU

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Kwantlen Polytechnic University *

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1130

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Finance

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Jan 9, 2024

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pdf

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Fall 2017 Page 1 of 1 1. To ensure that funds are available to repay the principal at maturity, a borrower deposits $2000 each year for three years. If interest is 6% compounded quarterly, how much will the borrower have on deposit four years after the first deposi t was made? 2. Ms. Simms made deposits of $540 at the end of every three months into a savings account. For the first five years interest was 5% compounded quarterly. Since then the rate of interest has been 5.5% compounded quarterly. How much is the account balance after 13 years? 3. Satwinder deposited $145 at the end of each month for 15 years at 7.5% compounded monthly. After her last deposit she converted the balance into an ordinary annuity paying $1200 every 3 months for 12 years. If interest on the annuity is compounded semi-annually, what is the nominal rate of interest paid by the annuity? 4. Leo invested $67 250 into an annuity earning 4.4% compounded semi-annually. How much is he able to withdraw from the annuity at the end of every three months for seven years? 5. When Shayla turned five years old, her mother opened up a Registered Education Savings Plan (RESP) and started making $600 end-of-quarter contributions. The RESP earned 7.46% semi-annually. At the end of each year, Human Resources and Skills Development Canada (HRSDC) made an additional deposit under the Canada Education Savings Grant (CESG) of 20% of her annual contributions into her RESP. Calculate the total maturity value available for Shayla's education when she turns 18. Round final answer to two decimal places. 6. Three years and two months ago, Mr. Magoo purchased a brand new Volkswagen Highline Jetta in Toronto for $32,854.75. He paid $5,000 as a down payment and financed the rest at 0.9% compounded monthly for six years. His payments have been $397.56 at the end of every month. a. What is the balance still owing on his vehicle today? b. How much interest will Mr. Magoo have paid at the end of 6 years 7. Sinclair does not believe in debt and will only pay cash for all purchases. He has already saved up $140,000 toward the purchase of a new home with an estimated cost of $300,000. Sinclair is looking at investing with one the following two financial institutions: Royal Bank of Canada (RBC) and Toronto Dominion Bank (TD Bank). Each bank is offering the following rate of return on investments: • RBC – 7.5% compounded monthly • TD Bank – 7.7% compounded quarterly a) Which institution should he choose to invest with? Ensure you provide justification for your answer. b) How much will his payments be if he wants to purchase his home in five years? Use the interest rate stated above for the chosen financial institution from part a).

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