Hello! My professor provided my class with a review packet that only provides so

Question

Hello!

My professor provided my class with a review packet that only provides solutions without explanations to the problems. Please EXPLAIN HOW TO GET THE ANSWERS to each question.

Thank you!

A commercial bill will mature for $100,000. The price paid for the bill 80 days
before maturity using 5% p.a. simple interest is

(A) $98,882.06
(B) $98,904.11
(C) $98,915.99
(D) $98,936.32
(E) $98,974.05


2. Sixty days before maturity, a promissory note was bought for $94,000. This
price was calculated using a simple discount rate of 5.7% p.a. Calculate the
size of the maturity payment.
(A) $93,119.23
(B) $93,127.41
(C) $94,880.77
(D) $94,889.10
(E) $99,358.00

3
3. The investor who paid $94,000 for the note in Question 2, sells it 20 days
before maturity. The selling price if the investor earned simple interest at
4% p.a. over the time the note was held is

(A) $93,589.74
(B) $93,794.42
(C) $94,206.03
(D) $94,412.05
(E) $94,618.08


4. An account was opened on 5 August with a deposit of $5,000. If there were no
further transactions, calculate the interest for 5 August to 30 September of the
same year, both dates inclusive. Use the daily balance method and a simple
interest rate of 3% p.a.

(A) $22.19
(B) $22.60
(C) $23.01
(D) $23.42
(E) $23.84


5. Calculate the nominal annual rate of interest convertible monthly which is
equivalent to 6.3% p.a. convertible quarterly.

(A) 0.52%
(B) 6.25%
(C) 6.27%
(D) 6.33%
(E) 6.45%


6. Kate received $10,000 on her 20th birthday as the proceeds of a deposit made
on the day of her birth. How much was that deposit if interest was at j4 = 6%?

(A) $ 94.52
(B) $3,038.90
(C) $3,118.05
(D) $4,545.45
(E) $7,424.70


7. How long will it take for money to double at 5% p.a. convertible quarterly?
(A) 13.95 years
(B) 14.21 years
(C) 14.47 years
(D) 20.00 years
(E) 55.80 years 4
8. An index measuring prices increased from 100 to 120 in 6 years. The average
annual compound rate of increase was approximately

(A) 3.0%
(B) 3.1%
(C) 3.2%
(D) 3.3%
(E) 3.4%


9. What sum of money should be invested today so that 5 annual payments of
$1,000 commencing in 3 years can be paid? Use j1 = 6%.

(A) $3,536.78
(B) $3,748.99
(C) $4,212.36
(D) $4,504.66
(E) $4,733.01


10. An annuity consists of 12 payments of $400. The payments are made from time 0
to time 11 inclusive. Calculate the value of the annuity at time 0 if interest is at
8% per time unit.

(A) $2,855.59
(B) $3,014.43
(C) $3,084.03
(D) $3,161.51
(E) $3,255.59


11. An annuity pays level instalments of $2,000 at the end of each quarter for
5 years. Interest is at j12 = 9%. The present value of the annuity is

(A) $31,875.92
(B) $31,927.42
(C) $32,115.58
(D) $49,907.52
(E) $96,346.75


12. Payments of $1,000 at the end of each year for 11 years accumulate
to $15,000. The effective annual rate of compound interest is
approximately

(A) 3%
(B) 6%
(C) 9%
(D) 12%
(E) 15% 5
13. $10,000 has been borrowed and is to be repaid by
n payments of R at times 1 to n inclusive plus a payment of X at time n+1.
The present value at time 0 of the n payments of R is $9,950. X will be

(A) Less than $50
(B) Exactly $50
(C) More than $50
(D) We can

Explanation / Answer

1) (C) $98,915.99
2) (A) $93,119.23
3) (E) $94,618.08
4) (B) $22.60
5) (E) 6.45%
6) (D) $4,545.45
7) (D) 20.00 years
8) (E) 3.4%
9) (A) $3,536.78
10) (B) $3,014.43
11) (D) $49,907.52
12) (C) 9%
13) (D) We can

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