Assignment 2 BUS 249 Chapter Ordinary Simple and general Annuity

Ordinary Simple Annuity - Calculating Future Value FV

1. Jason deposited $100.00 at the end of each month for five years into an account paying 6%
compounded monthly. What will be the balance in the account at the end of the five-year
term?
2. What will deposits of $470.00 made at the end of each month amount to after seven years if
interest is 10.8% compounded monthly?
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. Mr. Hughes has contributed $4000.00 per year for the last ten years into a RRSP account
earning 9.00% compounded annually. Suppose he leaves the accumulated contributions for
another five years in the RRSP at the same rate of interest. a) How much will Mr. Hughes
have in total in his RRSP account? b) How much did Mr. Hughes contribute? c) How much will
be interest?
5. A man put aside $5710.00 at the end of every 3 months for seven years. How much will he
have six years after the least deposit, if his account earned 5.6% p.a. compounded quarterly?

Ordinary Simple Annuity - Calculating Present Value PV

6. What is the discounted value of deposits of $150.00 made at the end of each month for
fourteen years if interest is 4.5% compounded monthly?
7. Find the present value for payments of $500.00 made at the end of each quarter for ten
years, if interest is 8% compounded quarterly.
8. Find the present value of ordinary semi-annual payments of $810.00 for five years at 5.45%
p.a., compounded semi-annually.
9. An installment contract for the purchase of a car requires payments of $568.60 at the end of
each month for the next three years. Suppose interest is 12.0% p.a. compounded monthly. a)
What is the amount financed? b) How much is the interest cost?
10. An installment contract for the purchase of a computer requires payments of $30.00 at the
end of each month for the next three years. Suppose interest is 18.00% p.a. compounded
monthly. a) What is the amount financed? b) How much is the interest cost?
11. Annette bought a vacation property for $22 900.00 down and quarterly mortgage payments
of $1224.51 at the end of each quarter for six years. Interest is 8.4% compounded quarterly.
a) What was the purchase price of the property? b) How much interest will Annette pay?

Ordinary Simple Annuities - Determining the Periodic Payment PMT

12. Janice plans to retire in 10 years and would like to receive $3000.00 per month for fifteen
years starting at the end of the first month after her retirement. Calculate the amount she
must invest now if interest is 7.5% compounded monthly.
13. A father wants to provide an annuity of $3350.00 payable at the end of each 6 months
during the three years his son attends college. It will be six years before his son goes to
college. What single deposit must he make today that will finance the annuity, if he can
invest his money at 7.84% p.a. compounded semiannually?
Assignment 2 BUS 249 Chapter Ordinary Simple and general Annuity

14. A loan was repaid in 7.25 years by end-of month monthly payments of $472. If interest was
6.12% compounded monthly, how much interest was paid?
15. A car was purchased for $3500.00 down and payments of $575.00 at the end of each month
for 5 years. Interest is 9.72% compounded monthly. a) What was the purchase price of the
car? b) How much will be the amount of interest paid?
16. What is the size of end-of-month monthly deposits which will accumulate to $122 200.00
after six years if interest is 5.7% compounded monthly?
17. What payment is required at the end of each quarter for 8 years to repay a loan of $20
000.00 at 6.0% compounded quarterly?
18. The Chretiens bought a rental property valued at $125 000.00 by paying 25% down and
mortgaging the balance over 21.5 years through equal payments at the end of each quarter
at 8.6% compounded quarterly. What was the size of the quarterly payments?
19. A $5000.00 loan requires payments at the end of each quarter for five years. If the interest
rate on the loan is 8% compounded quarterly, calculate the size of each payment.

Determining the Term n of an Annuity

20. What is the term of a mortgage of $235 000.00 repaid by monthly payments of $2475.00 if
interest is 7.55% compounded monthly?
21. How many quarterly payments will it take for $400.00 deposited at the end of each quarter
to amount to at 6% compounded quarterly?
22. Suppose $726.56 is deposited at the end of every six months into an account earning 6.45%
compounded semi-annually. If the balance in the account four years after the last deposit is
to be $31 300.00, how many deposits are needed?
23. How many yearly payments will it take for $25 000.00 deposited at the end of each year to
amount to at 9% compounded yearly?

Ordinary General Annuities

- Calculating the Future Value FV
1. Calculate the accumulated value after ten years of payments of $1000.00 made at the end of
each quarter if interest is 4% compounded semi-annually.
2. What is the accumulated value of deposits of $1120.00 made at the end of every six months
for three years if interest is 8.48% compounded quarterly?
3. What is the future value of payments of $230.00 made at the end of every three months in
twenty-one years if interest is 7.65% compounded annually?
4. Conchita Martinez saves $17.25 at the end of each month and deposits the money in an
account, paying 4.96% compounded quarterly. a) How much will she accumulate in 22 years?
b) How much of the accumulated amount is interest?
5. Ali saves $25.00 at the end of each month and deposits the money in a savings account,
paying 3.00% compounded semi-annually. a) How much will she accumulate in 20 years? b)
How much of the accumulated amount is interest?

Ordinary General Annuities - Calculating the Present Value PV

Assignment 2 BUS 249 Chapter Ordinary Simple and general Annuity

6. A loan is repaid by making payments of $6000.00 at the end of every six months for twelve
years. If interest on the loan is 8% compounded quarterly, what was the principal of the
loan?
7. 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?
8. What is the principal from which $2279.00 can be withdrawn at the end of each month for
17.5 years if interest is 5.44% compounded quarterly?
9. If a loan was repaid by semi-annual payments of $4720.00 in 6.5 years at 8.24%
compounded quarterly, how much interest was paid?
10. For her daughter's university education, Carla Hackl has invested an inheritance in a fund
paying 9.2% compounded quarterly. If ordinary annuity payments of $4750.00 per month are
to be made out of the fund for 5 years and the annuity begins 7.75 years from now, how
much was the inheritance?

Ordinary General Annuities - Determining the Periodic Payment PMT

11. Calculate the amount of money that must be deposited at the end of every three months
into an account paying 6% compounded monthly to accumulate to $12 500.00 in ten years?
Answer: FV = 12 500.00; n = 10(4) = 40; i = = 0.5% = 0.005; I/Y = 6; P/Y = 4; C/Y = 12; c = = 3 p
= (1 + i)c - 1 = (1 + 0.005)3 - 1 = 0.015075125 FV = PMT 12500 = PMT 12500 =
PMT[54.35422486]
12. 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.
13. Kelsey bought a car priced at $19 700.00 for 10% down and equal monthly payments for 4.5
years. If interest is 8.22% compounded semi-annually, what is the size of the monthly
payment?
14. Sean Paul borrowed $20 000.00 from his father to finance his new business. The loan
agreement calls for equal payments at the end of each month for 10 years. The payments are
deferred for 4 years and interest is 4.00% compounded semi-annually. What is the size of the
monthly payments?
15. How much must be contributed into an RRSP at the end of each year for 37 years to
accumulate to if interest is 8.04% compounded quarterly?

Ordinary General Annuities - Determining the Term n

16. 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?
17. For how long will Harold have to make payments of $550.00 at the end of every three
months to repay a loan of $16 900.00 if interest is 9% compounded monthly?
18. Deon makes monthly contributions of $250.00 at the end of every month into an RRSP.
Calculate, to the nearest month, how long it will take to grow to $100 000.00 if interest is 8%
compounded annually.
19. For how long must $179.23 be deposited at the end of each month to accumulate to
$9700.00 at 6.18% compounded quarterly?