Compound Interest 2

Question Description

1. How long did it take $4,625 earning 7.875% compounded annually to grow to $8,481.61?

2. The current balance on a loan is $3,837.30. If the interest rate on the loan is 10% compoundedmonthly, how long ago was the $2,870 loan made?

3. What is the remaining time until the maturity date of a $10,000 strip bond if it is purchased for$4,011.33 to yield 6.4% compounded semiannually until maturity?

4. A few years ago, Avtar invested $6,000 in a compound-interest GIC that earned 4.5%compounded semiannually. He recently received the maturity value of $7,168.99. What was theterm of the GIC?

5. Rounded to the nearest month, how long will it take an investment to double if it earns:a. 8.4% cm?b. 10.5% csa?

6. Rounded to the nearest month, how long will it take an investment to quadruple if it earns:a. 8% ca?b. 9% csa?

7. Which interest rate would you prefer to earn on a three-year GIC: 6% compounded monthly,6.1% compounded quarterly, 6.2% compounded semiannually or 6.3% compounded annually?

8. What is the effective rate of interest on a credit card that calculates interest at a rate of 1.8%per month?

9. If the nominal rate of interest paid on a savings account is 2% compounded monthly, what is theeffective rate of interest?

10. If a $5,000 investment grew to $6450 in 30 months of monthly compounding, what effectiverate of return was the investment earning?

11. Lisa is offered a loan from a bank at 7.2% compounded monthly. A credit union offers similarterm, but at a rate of 7.4% compounded semiannually. Which loan should she accept? Presentcalculations that support your answer.

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