1. Johan recently received his annual performance bonus from his employer. He has set up an investment savings plan to which he will contribute $2000 each year from his bonus and $400 per month from his regular salary. Johan will make his initial contributions of $2000 and $400 today. Rounded to the nearest dollar.
a) What will the plan be worth after 25 years if it earns 7.5% compounded monthly?
b) How much did Johan's contributions earn during the 25 years?
2. Monarch Distributing Ltd. plans to accumulate funds for the purchase of a larger warehouse seven years from now. If Monarch contributes $10,000 at the beginning of each month to an investment account earning 4.5% compounded semiannually, what amount (rounded to the nearest dollar) will Monarch accumulate by the end of the seven years?
3. The MSRP on a Nissan Maxima 3.5 SV is $38,625. The interest rate on a 48-month lease is 1.9% compounded monthly. What is the monthly lease payment, assuming a down payment of $5400 and a residual value of $11,990?
4. An RRSP is now worth $223,000 after contributions of $2500 at the beginning of every six months for 16 years. What effective rate of return has the plan earned?
5. The Lifestyle Fitness and Exercise Centre charges annual membership fees of $600 (in advance) or six "easy" payments of $120 at the beginning of every two months. What effective interest rate is being charged on the instalment plan?
6. Calculate the future value of an investment plan requiring contributions of $800 at the beginning of each calendar quarter for seven years. Assume that the rate of return will be 8% compounded quarterly for the first 30 months and 7% compounded semiannually for the remainder of the annuity's term.
7. Noel has $300,000 with which to purchase an ordinary annuity delivering monthly payments for 20 years after a 10-year period of deferral. What monthly payment will he receive if the undistributed funds earn 5% compounded semiannually?
8. How much more money is required to fund an ordinary perpetuity than a 30-year ordinary annuity if both pay $5000 quarterly and money can earn 5% compounded quarterly?
9. What quarterly compounded nominal rate of return is required to return $2000 per quarter if the perpetuity fund is $98,000? What is the effective rate of interest?