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MATH 1191 (FALL 2023)

REVIEW FOR FINAL EXAMINATION PART 1

1. 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?

2. 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?

3. The Omega Venture Group needs to borrow to finance a project. Repayment of the loan involves payments of $8500 at the end of every three months for eight years. No payments are to be made during the development period of three years. Interest is 9% compounded quarterly.

a. How much should the Group borrow?

b. What amount will be repaid?

c. How much of the amount will be interest?

4. An investment in a lease offers returns of $2500 per month due at the beginning of each month for five years. What investment is justified if the returns are deferred for two years and the interest required is 12% compounded monthly?

5. Leo’s Auto Repairs Inc. borrowed $5500 to be repaid by end-of-month payments over four years. Interest on the loan is 9% compounded monthly.

a. What is the size of the periodic payment?

b. What is the outstanding principal after the 13^th payment?

c. What is the interest paid in the 14^th payment?

d. How much principal is repaid in the 14^th payment?

6. Maple Sweets Inc. borrowed at 7.44% compounded monthly to purchase equipment, agreeing to make payments of $2160 at the end of every three months for 14 payments.

a. What is the equivalent cash price of the equipment?

b. How much will be owed at the end of two years?

c. How much of the principal will be repaid within the first two years?

d. How much interest is paid during the first two years?

7. A loan of $7200 is repaid by payments of $360 at the end of every three months. Interest is 11% compounded quarterly.

a. How many payments are required to repay the debt?

b. What is the size of the final payment?

8. When the Bradleys purchased a home, they borrowed $170,000 as a mortgage to be amortized by making monthly payments for 25 years. Interest is 4.89% compounded semi-annually for a 3-year term.

a. Compute the size of the monthly payment.

b. Determine the balance at the end of the 3-year term.

c. If the mortgage is renewed for a 4-year term at 5.24% compounded semi-annually, what is the size of the monthly payment for the renewal term?

9. A $100,000, bond redeemable at par on October 1, 2040, was purchased on January 15, 2019. Interest is 5.9% payable semi-annually and the yield is 9% compounded semi-annually.

a) What is the cash/purchase price of the bond?

b) What is the accrued interest?

c) What is the market price (quoted price)?

d) Use the TI BA II Plus calculator to verify your answers to parts a, b and c