Financial Mathematics Problems and Solutions

1. A six-year, $1650.00 note bearing interest at 9.51% compounded annually was discounted at 11.2% compounded semi-annually yielding proceeds of $1916.75. How many months before the due date was the discount date?

2. A 11-year $8000.00 promissory note, with interest at 8.4% compounded monthly, is discounted at 6.5% compounded semi-annually yielding proceeds of $14 631.15. How many months before the due date was the date of discount?

3. The Olfert Contractors, Inc., are saving $958.00 every month in order to purchase a new paving machine in twelve years. Their savings certificates pay 6% p.a. compounded monthly. How much of the maturity value will be interest?

4. How much interest is included in the accumulated value of $250 paid at the end of every month for 5 years if the interest rate is 4.0% compounded monthly?

5. An installment contract for the purchase of a car requires payments of $570.60 at the end of each month for the next three years. Suppose interest is 11.8% p.a. compounded monthly.

a. What is the amount financed?

b. How much is the interest cost?

6. A trust fund is set up to make payments of $1320.00 at the end of each month for seven years. Interest on the fund is 7.28% compounded monthly.

a. How much money must be deposited into the fund?

b. How much will be paid out of the fund?

c. How much interest is earned by the fund?

7. What payment is required at the end of each month for 5 years to repay a loan of $20 000.00 at 6.0% compounded monthly?

8. What deposit made at the end of each quarter will accumulate to $20 000.00 in four years at 4% compounded quarterly?

9. How many monthly payments will it take for $1000.00 deposited at the end of each month to amount to $50 000.00 at 9% compounded monthly?

10. In what period of time could you pay back a loan of $13 900.00 by making monthly payments of $296.00 if interest is 6.5% compounded monthly?

11. What is the accumulated value of deposits of $2000.00 made at the end of every year for three years if interest is 6.00% compounded quarterly?

12. What is the discounted value of $4760.00 paid at the end of each year for 7 years if interest is 6.52% compounded quarterly?

13. A $ 120 000.00 mortgage is amortized over 25 years. If interest on the mortgage is 8.5% compounded semi-annually, calculate the size of monthly payments made at the end of each month.

14. How much must be contributed into an RRSP at the end of each year for 37 years to accumulate to $213 000.00 if interest is 8.04% compounded quarterly?

15. How many deposits of $6100.00 made at the end of every 6 months are needed to accumulate to $172 000.00 at 5.24% compounded quarterly?