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Test 3 Review Part 1
Test 3 Review Part 1
1. An investor plans to make semi-annual deposits of $1,600 at the end of each period for
14 years into an investment account that earns interest at 4.2% compounded semi-
annually.
a) Calculate the accumulated value of this annuity. $𝟔𝟎, 𝟏𝟒𝟖. 𝟗𝟓
b) How much of this amount is interest? $𝟏𝟓, 𝟑𝟒𝟖. 𝟗𝟓
2. James will make deposits at the end of every three months for 24 years. He wants to
accumulate $150,000 and will earn 6% compounded quarterly. How much should he
deposit each period? $𝟕𝟎𝟖. 𝟒𝟖
3. A loan is to be repaid by payments of $1428.66 at the end of each month for 6 years at
4.5% compounded monthly.
a) Determine the amount of money that was borrowed. $𝟖𝟗, 𝟗𝟗𝟗. 𝟖𝟑
b) What will be the cost of financing? $𝟏𝟐, 𝟖𝟔𝟑. 𝟔𝟗
4. A $33,600 car is purchased by making a 20% down payment and paying the balance with
equal monthly payments at the end of each month for 6 years. Find the size of the
payments if interest is 5% compounded monthly. $𝟒𝟑𝟐. 𝟗𝟎
5. Karen currently has $73,250 in an investment account. She will now begin semi-annual
deposits of $3,000 into the same account at the end of each period. If she expects to
earn 6.5% compounded semi-annually, what amount of money will she have in the
account in 8 years? $𝟏𝟖𝟑, 𝟖𝟕𝟏. 𝟏𝟎
6. Carrie is paying off a 5-year loan with payments of $940.25 at the end of each month.
Interest is 4% compounded monthly. Find the outstanding balance after the 45th
payment. $𝟏𝟑. 𝟕𝟑𝟒. 𝟔𝟓
7. For 18 years Howard will make deposits at the end of each month into an account that
will pay 5% compounded monthly. He will then begin to withdraw $8,000 twice a year
for 12 years and he expects to earn 6% compounded semi-annually during this time.
Calculate the size of Howard’s monthly deposits. $𝟑𝟖𝟕. 𝟗𝟖
8. Sam has been given two options by his insurance company.
9. Abbie will retire in 6 years. After she retires, she would like to be able to withdraw
$4,000 at the end of each month for one year while travelling. What single deposit,
made today, is required to make this possible? Assume an interest rate of 4%
compounded monthly. $𝟑𝟔, 𝟗𝟔𝟕. 𝟑𝟕
10. Morgan has deposited $1,500 at the end of each month for the last 8 years in an
account paying 4% compounded monthly. After the last deposit, she will transfer the
accumulated amount to a 5-year investment account earning 3% compounded
quarterly. What is the maturity value of this investment? $𝟏𝟗𝟔, 𝟔𝟕𝟖. 𝟖𝟐