Section 3-1 Pages 136-138: 28, 30, 31, 32, 34, 35, 36, 37, 38, 40
#28 If you paid $120 to a loan company for the use of $2000 for 90 days, what annual rate of interest did they charge?
#30 George finds a company that charges 70¢ per day for each $1000 borrowed. If he borrows $3000 for sixty days, what amount would he have to repay, and what annual interest rate will he be paying the company?
#31 What annual interest rate is earned by a 13-week T-bill with a maturity value of $1000 that sells for $984.37?
#32 What annual interest rate is earned by a 33-week T-bill with a maturity value of $1000 that sells for $994.16?
#34 What is the purchase price of a 26 week T-bill with a maturity value of $1000 that earns an annual interest rate of 6.203%?
#35 For services rendered, an attorney accepts a 90-day note for $5,500 at 12% simple interest from a client. (Both interest and principal will be repaid at the end of 90 days.) Wishing to be able to use her money sooner, the attorney sells the note to a third party for $5,5,40 after 30 days. What annual interest rate will the third party receive for the investment?
#36 To complete the sale of a house, the seller accepts a 180-day note for $10,000 at 10% simple interest. (Both interest and principal will be repaid at the end of 180 days.) Wishing to be able to use the money sooner for the purchase of another house, the seller sells the note to a third party for $10,100 after 60 days. What annual interest rate will the third party receive for the investment?
The buying and selling commission schedule shown below is from a well-known online discount brokerage firm. Taking into consideration the buying and selling commissions in this schedule, find the annual rate of interest earned by each investment in problems 37-40.
|
Transaction Size |
Commission Rate |
|
$0-$2,500 |
$22 + 1.4% of principal |
|
$2,501-$6,000 |
$38 + 0.45% of principal |
|
$6,001-$22,000 |
$55 + 0.23% of principal |
|
$22,001-$50,000 |
$79 + 0.15% of principal |
|
$50,001-$500,000 |
$119 + 0.07% of principal |
|
$500,001+ |
$169 + 0.06% of principal |
#37 An investor purchases 500 shares at $14.20 a share, holds the stock for 39 weeks, and then sells the stock for $16.84 a share.
#38 An investor purchases 450 shares at $64.84 a share, holds the stock for 26 weeks, and then sells the stock for $72.08 a share.
#40 An investor purchases 75 shares at $14.20 a share, holds the stock for 150 days, and then sells the stock for $35.40 a share.
Section 3-2 Pages 147-150: 35, 36, 38, 44, 50, 52, 62, 66, 68
#35 A newborn child receives a $5,000 gift toward a college education from her grandparents. how much will the $5,000 be worth in 17 years if it is invested at 7% compounded quarterly?
#36 A person with $8,000 is trying to decide whether to purchase a car now, or to invest the money at 6.5% compounded semiannually and then buy a more expensive car. How much will be available for the purchase of a car at the end of 3 years?
#38 If the inflation rate averages 4% per year compounded annually for the next 5 years, what will a car costing $10,000 now cost 5 years from now?
#44 Which is the better investment and why: 9% compounded monthly or 9.3% compounded annually?
#50 If $1 had been placed in a bank account at the birth of Christ and forgotten until now, how much money would be in the account at the end of 2010 if the money earned 2% interest compounded annually? 2% simple interest? (Now you can see the power of compounding and see why inactive accounts are closed after a relatively short period of time.)
#52 how long will it take money to triple if it is invested at 5% compounded daily? 6% compounded annually?
#62 What annual nominal rate compounded daily has the same annual percentage yield as 6% compounded monthly?
A zero coupon bond is a bond that is sold now at a discount and will pay its face value at some time in the future when it matures - no interest payments are made.
#66 If you pay $30,000 for a 5-year zero coupon bond with a face value of $40,000, what is your annual compound rate of return?
#68 An on-line financial service recently listed the following 1-year CD accounts:
(A) Banking for CDs: 6.5% compounded quarterly
(B) Wingspan Bank: 6.6% compounded monthly
(C) Discover Bank: 6.6% compounded daily
What is the annual percentage yield of each?
Section 3-3 Pages 155-157: 14, 16, 18, 20, 21, 25, 28, 29, 30
#14 Recently. USG Annuity and Life offered an annuity that pays 7.25% compounded monthly. If $1000 is deposited in this annuity every month, how much is in the account after 15 years? How much of this is interest?
#16 A self-employed person has a Keogh retirement plan. (This type of plan is free of taxes until the money is withdrawn.) If deposits of $7,500 are made each year into an account paying 8% compounded annually, how much will be in the account after 20 years?
#18 Recently, The Hartford offered an annuity that pays 5.5% compounded monthly. What equal monthly deposit should be made into this annuity in order to have $100,000 in 10 years?
#20 Parents have set up a sinking fund in order to have $120,000 in 15 years for their children's college education. How much should be paid semiannually into an account paying 6.8% compounded semiannually?
#21 If $1,000 is deposited at the end of each year for 5 years into an ordinary annuity earning 8.32% compounded annually, construct a balance sheet showing the interest earned during each year and the balance at the end of each year.
#25 Bob makes his first $1,000 deposit into an IRA earning 6.4% compounded annually on his 24th birthday and his last $1,000 on his 35th birthday (12 deposits in all). With no additional deposits, the money in the IRA continues to earn 6.4% interest compounded annually until Bob retires on his 65th birthday. How much money is in the IRA when Bob retires?
#26 John procrastinates and does not make his first $1,000 deposit into an IRA until he is 36, but then he continues to deposit $1,000 each year until he is 65 (30 deposits in all). If John’s IRA also earns 6.4% compounded annually, how much is in his IRA when he makes his last deposit on his 65th birthday?
#28 Suppose that Bob continued making $1,000 deposits into his IRA every year until his 65th birthday. If John still waits until his 36th birthday to start his IRA, how much must he deposit each year in order to have the same amount at age 65 as Bob has?
#29 Compubank, an online banking service, offered a money market account with an APY of 4.86%.
a) If interest is compounded monthly, what is the equivalent annual nominal rate?
b) If you wish to have $10,000 in this account after 4 years, what equal deposit should you make each month?
#30 American Express’s online banking division offered a money market account with an APY of 5.56%
a) If interest is compounded monthly, what is the equivalent annual nominal rate?
b) If a company wishes to have $1,000,000 in this account after 8 years, what equal deposit should be made each month?
Section 3-4 Pages 166-167: 13, 14, 16, 18, 20, 23, 26, 28, 30, 32, 35, 37
#13 American General offers a 10-year annuity with a guaranteed rate of 6.65% compounded annually. How much should you pay for one of these annuities if you want to receive payments of $5,000 annually over a 10-year period?
#14 American General also offers a 7-year annuity with a guaranteed rate of 6.35% compounded annually. How much should you pay for one of these annuities if you want to receive payments of $10,000 annually over a 7-year period?
#16 E-Loan recently offered 36-month auto loans at 9.84% compounded monthly to applicants with fair credit ratings. If you have a fair credit rating and can afford monthly payments of $350, how much can you borrow from E-Loan? What is the total interest you will pay for this loan?
#18 If you buy a computer directly from the manufacturer for $3,500 and agree to repay it in 60 equal installments at 1.75% interest per month on the unpaid balance, how much are your monthly payments? How much total interest will be paid?
#20 A recreational vehicle costs $80,000. You pay 10% down and amortize the rest with equal monthly payments over a 7-year period. If you must pay 9.25% compounded monthly, what is your monthly payment? How much interest will you pay?
#23 A woman borrows $6,000 at 9% compounded monthly, which is to be amortized over 3 years in equal monthly payments. For tax purposes, she needs to know the amount of interest paid during each year of the loan. Find the interest paid during the first year, the second year, and the third year of the loan.
#26 A family is thinking about buying a new house costing $120,000. They must pay 20% down, and the rest is to be amortized over 30 years in equal monthly payments. If money costs 7.5% compounded monthly, what will their monthly payment be? How much total interest will be paid over the 30 years?
#28 A person establishes a sinking fund for retirement by contributing $7,500 per year at the end of each year for 20 years. For the next 20 years, equal yearly payments are withdrawn, at the end of which time the account will have a zero balance. If money is worh 9% compounded annually, what yearly payments will the person receive for the last 20 years?
#30 A family has a $50,000, 20-year mortgage at 7.2% compounded monthly. Find the monthly payment. Also find the unpaid balance after:
a) 5 years b) 10 years c) 15 years
#32 At the time they retire, a couple has $200,000 in an account that pays 8.4% compounded monthly.
a) If they decide to withdraw equal monthly payments for 10 years, at the end of which time the account will have a zero balance, how much should they withdraw each month?
b) If they decide to withdraw $3,000 a month until the balance in the account is zero, how many withdrawals can they make?
#35 An ordinary annuity pays 7.44% compounded monthly.
a) A person deposits $100 monthly for 30 years and then makes equal monthly withdrawals for the next 15 years, reducing the balance to zero/ What are the monthly withdrawals? How much interest is earned during the entire 45-year process?
b) If the person wants to make withdrawals of $2,000 per month for the lat15-years, how much money must be deposited monthly for the first 30 years?
#37 A couple wishes to borrow money using the equity in their home for collateral. A loan company will loan them up to 70% of their equity. They purchased their home 12 years ago for $79,000. The home was financed by paying 20% down and signing a 30-year mortgage at 12% on the unpaid balance. Equal monthly payments were made to amortize the loan over a 30-year period. The net market value of the house is now $100,000. After making their 144th payment, they applied to the loan company for the maximum loan. How much (to the nearest dollar) will they receive?
Section 4-4 Pages 223-225
23, 24, 30,49,57,59 <![endif]>
Section 4-5 Page 238
22, 24, 26, 28
Section 4-6 Pages 247-248
17, 18, 43, 46, 47 (set-up only)
Section 4-7 Page 257
24, 25, 26
Section 5-1 Pages 277-278
28, 30 32, 34, 50, 52
Section 5-2 Page 292
32, 33, 34, 40
Section 5-3 Page 301
6, 7, 10, 12
Section 5-4 Pages 318-321
1, 2, 3, 4, 6, 22, 24, 39, 42