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MATH 1191 Review for Test #2

Fall 2023

1. An amount of $2300 earns $500 interest in 3 years and 2 months. What is the effective annual rate of interest if interest compounds monthly?

2. A bank pays 7.5% interest compounded semi-annually on certain types of deposits. If interest is compounded monthly, what nominal rate of interest will maintain the same effective rate of interest?

3. At what nominal rate of interest will money double itself in six years and 9 months if compounded quarterly?

4. What is the nominal annual rate of interest compounded quarterly at which $420 will accumulate to $1000 in nine years and six months?

5. Saving for his retirement 25 years from now Jason set up a savings plan whereby he will deposit $25 at the end of each of month for the next 15 years. Interest is 3.6% compounded monthly.

a. How much money will be in Jason’s account on the date of his retirement?

b. How much will Jason contribute?

c. How much will be interest?

6. An installment contract for the purchase of a car requires payment of $252.17 at the end of each month for the next three years. Suppose interest is 8.4% p.a. (per annum) compounded monthly:

a. What is the amount financed?

b. How much is the interest cost?

7. Edwin Ng made deposits of $500 into his savings account at the end of every three months for 10 years. If interest is 4.5% compounded semi-annually and if he leaves the accumulated balance for another five years, what will be the balance in his account then?

8. A property was purchased for $5000 down and payments of $2500 at the end of every six months for six years. Interest is 6% compounded monthly.

a) What was the purchase price of the property?

b) How much is the cost of financing?

9. Derrick bought a car priced at $9300 for 15% down and equal monthly payments for four years. If interest is 8% compounded semi-annually, what is the size of the monthly payment?

10. Payments on a five-year lease valued at $37,750 are to be made at the beginning of every six months. If interest is 9% compounded semi-annually, what is the size of the semi-annual payments?

11. Samantha has saved $85,000. If she decides to withdraw $3,000 at the beginning of every three months and interest is 6.125% compounded annually, for how long can she make withdrawals?

12. What is the nominal annual rate of interest compounded annually on a lease valued at $21,600 if payments of $680 are made at the beginning of each month for three years?