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1. Rachel would like to save $100 every month for the next four years in a savings account at 2% compounded quar terly. (i) What would be the accumulated value of the investments at the end of four years? (ii) What would be the amount of interest earned?
2. Madison makes contributions of $500 at the beginning of every six months for ten years towards an RRSP. If the RRSP earns 5% compounded semi-annually, what would be the value of her RRSP at the end of the time period?
3. Stefani makes regular deposits of $200 at the beginning of every month into a savings account that earns 3% compounded monthly. After one year of deposits, the interest rate drops to 2.7% compounded monthly. How much money has accumulated in the savings account after five years of deposits?
4. A supplier of machinery provided a company with the following two options to lease or buy equipment: Buy Option: Pay $17,500 immediately to own the equipment. Lease Option: Make lease payments of $180 at the beginning of every month for four years. At the end of four years, pay $10,000 to own the equipment. The cost of borrowing is 3% compounded annually. (i)Which option is economically better for the company? (ii) In the lease option, what will be the buyback value of the equipment at the end of three years?
5. Rodney received a $35,000 home improvement loan from his bank at an interest rate of 6% compounded monthly. (i)How much would he need to pay every month to settle the loan in ten years? (ii) What was the amount of interest charged?
6. What amount should you invest now if you want to receive payments of $1000 at the end of each year for ten years with the receipt of the first payment three years from now? Assume that money earns 5% compounded annually.
7. A college wants to provide students with a perpetual scholarship of $10,000 at the end of every three months. How large should its endowment fund be if the money is growing at 8% compounded quarterly?
8. Adam made contributions growing at 2.25% at the end of every 3 months to his RRSP that was earning an interest rate of 8% compounded quarterly. In 30 years, his RRSP savings had accumulated to $147,034.45. (i) What was the size of the first contribution? (ii) What was the total interest earned?
