Question 1: To help you pay for the high living costs, your parents has offered you either $30,000 in 5 years or $22,000 today. Which option would you choose today, given that the interest rate is 4.5% per year?
Question 2: You plan to deposit $15,000 in a saving account at Scotia Bank for the next 8 years. If the saving account will pay you 3% interest rate per year, calculate the following:
a) How much will you have at the beginning of the 9th year?
b) How much will be the compound interest at the end of 8th year?
Question 3: Jonathan plans to invest $15,000 today in a high growth mutual fund, which promises to be worth $500,000 after 28 years. What is the implied annual rate of return?
Question 4: If Tiffany invests $2,500 in a saving account at the beginning of each year for the next 11 years, calculate the following questions given an annual rate of return of 6%:
a) How much would be the present value of this investment?
b) How much would be the future value of this investment at the end of 11th year?
Question 5: You just inherit a windfall from your grandparents today. The first payment of $32,000 will be paid right away, and the future payment will grow at 2% per year and will last forever. What will be the present value of this inheritance, given that the interest rate will be 5% forever?
Question 6: a) Given an effective annual rate of 7.5%, determine the equivalent effective bi-weekly rate and stated annual rate compounded bi-weekly;
b) Given an effective weekly rate of 0.15%, determine the equivalent effective annual rate and stated annual rate compounded weekly.
Question 7: When James was born, James's parents started to save $2,500 per year at the end of each year in a Registered Education Savings Plan (RESP) to pay for his future university tuition costs. The RESP account has a rate of return at 9% per year. His parents will make 17 deposits to this RESP account.
a) How much will be his RESP account balance when he begins his University studies?
b) How much will he be able to withdraw from this account at the end of each year during his University education (assuming that he will finish the University education in 4 years)?
Question 8: Jack sets a goal to achieve his financial independence. He plans to invest $3,500 at the end of this year and plans to increase his investment 3% each year in the subsequent years. If he invests for the next 22 years, will he be able to achieve his goal of $1 million at the end of 22th year from now? Assuming that the rate of return for his investment is 11%.
Question 9: Tommy is thinking about buying a new BMW 328i that will cost him $43,500. He chooses to finance the vehicle using his future pay cheques. The car dealer quotes him a stated annual interest rate compounded weekly at 6.9%. If he decides to choose to a weekly payment schedule, how much does he need to pay at the end of each week, assuming that the term of the financing is 36 months?
Question 10: The shareholders of ActiveMotion Inc. need to select five new directors. There are 750,000 shares outstanding, currently trading at $42 per share. You would like to serve on the board of directors; unfortunately no one else will be voting for you. How much will it cost you to be certain that you will be elected if the firm uses straight voting?
How much will it cost you if the company uses cumulative voting?
Question 11: You just bought a three-bedroom condo in Wascana Creeks, Regina. You signed up a mortgage with TD Bank for a mortgage of $515,000 over the next 20 years at a fixed rate of 5.95% (stated annual rate compounded semi-annually). Your mortgage payments are due at the end of each month.
a) How much will be your monthly payment?
b) How much will be your payments over the first two years?
c) Immediately after you have made the payment at the end of 14th year, what is the amount of principal remaining to be paid on the mortgage?
d) How much will be the total amount of interest paid during the 20-year period?