MATH CLASS 3

GOBC Real Estate • Mortgage Notes

• PV
• FV
• YIELD (I/YR %)

www.GOBCrealestate.com
 MATH CLASS 3- PV, FV, YIELD
FIND PRESENT VALUE (PV) / FUTURE VALUE (FV)
1. Kevin wants to purchase an investment which will give him payments of $450 at the end of every quarter for the
next four years. If Kevin wants to earn an interest rate of 6% per annum, compounded quarterly, how much should
he pay today for this investment?

(1) $8,069.57
(2) $7,224.92 N J =1. # NOM
(3) $6,359.07
(4) $6,983.29 IYR PMT = # PYR

PV # EFF

PMT # PYR

FV # NOM

#PYR

2. What will be the purchase price of a mortgage which will provide the purchaser with 48 payments of $650 plus
an outstanding balance of $55,858.13 at the end of 48 months, if the purchaser of the mortgage requires an
effective annual yield of 15%?

(1) $55,698.26
(2) $54,867.08 N J = # NOM
(3) $52,536.87
(4) $58,989.30 IYR PMT = # PYR

PV # EFF

PMT # PYR

FV # NOM

#PYR

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 MATH CLASS 3- PV, FV, YIELD
3. Dave has recently been hired at a new job and is starting to make investments with his excess income. Dave's
first investment is to place $5,000 in a term deposit where it will accrue interest at a rate of 6.5% per annum,
compounded annually. The term of the investment is 18 months. How much money will Dave receive from the
investment at the end of the 18-month term?

(1) $5,487.50
(2) $5,473.55 N J = # NOM
(3) $5,495.34
(4) $5,503.52 IYR PMT = # PYR

PV # EFF

PMT # PYR

FV # NOM

#PYR

4. An investor has decided to establish a bank account in order to accumulate sufficient capital at the end of 7 years
to purchase a boat. If the account pays interest at 16% per annum, compounded annually and the investor makes
deposits of $8,000 at the end of each year, how much capital will he have accumulated at the end of 7 years?

(1) $32,308.52
(2) $113,920.74
N J = # NOM
(3) $22,609.76
(4) $91,310.99
IYR PMT = # PYR

PV # EFF

PMT # PYR

FV # NOM

#PYR

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 MATH CLASS 3- PV, FV, YIELD
5. Johnny F. Lane wants to purchase a sports car which will be introduced to the market 10 months from now for
$19,800. How much money should Johnny deposit in the bank today if he can earn 9% per annum, compounded
monthly in his savings account?

(1) $18,374.46
N J = # NOM
(2) $ 7,856.84
(3) $19,800.00 IYR PMT = # PYR
(4) $18,018.00
PV # EFF

PMT # PYR

FV # NOM

#PYR

6. A real estate developer has borrowed $60,000 by way of an interest accruing loan written at J12 = 18%. How
much will the developer owe at the end of nine months?

(1) $74,400.00
(2) $68,603.40 N J = # NOM
(3) $68,279.60
(4) $70,800.00 IYR PMT = # PYR

PV # EFF

PMT # PYR

FV # NOM

#PYR

7. A borrower wishes to make payments of no more than $500 per month for 360 months. If interest rates are
currently 10.5% per annum, compounded semi-annually, what is the maximum amount that should be lent?

(1) $55,500.00
(2) $54,660.38 N J = # NOM
(3) $55,670.60
(4) $56,675.77 IYR PMT = # PYR

PV # EFF

PMT # PYR

FV # NOM
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#PYR
 MATH CLASS 3- PV, FV, YIELD
8. An investor borrows $140,000 at 22% per compounding period for six periods. How much will be owing at the
end of the term if the interest is accruing?

(1) $140,000.00
(2) $170,800.00 N J = # NOM
(3) $36,235.26
(4) $461,622.55 IYR PMT = # PYR

PV # EFF

PMT # PYR

FV # NOM

#PYR

9. A mortgage with a face value of $88,000 and a contract rate of interest of 1.8% per month calls for monthly
payments of $1,592. What is the amount owing just after the 40th monthly payment has been made?

(1) $63,217.19
(2) $87,537.19 N J = # NOM
(3) $87,148.21
(4) $87,520.86 IYR PMT = # PYR

PV # EFF

PMT # PYR

FV # NOM

#PYR

10. Fancy Finance Corporation has agreed to advance $370,000 to a real estate developer for 30 days.
Alternatively, Fancy Finance could have earned an effective annual rate of 16% on the funds if they invested
elsewhere. What is the minimum amount that Fancy Finance should receive from the developer in 30 days?

(1) $374,896.81
(2) $374,933.33 N J = # NOM
(3) $374,541.24
IYR PMT = # PYR
(4) Cannot be
determined
PV # EFF

PMT # PYR

FV # NOM
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#PYR
 MATH CLASS 3- PV, FV, YIELD
INHERITANCE QUESTIONS_________________________________________
11. Jack & Jill have just received an inheritance of $350,000. Their plans are to immediately leave on a round-the-
world sailing trip, and upon their return in 3 years, purchase a house with a $100,000 down payment. They have
found a place to invest their money at 12.75% per annum, compounded monthly for a three-year term. What is the
maximum amount of their inheritance they can spend now to purchase traveler’s cheques (which will be spent on
their vacation) while still having a $100,000 down payment in 3 years?

(1) $68,353.17
N J = # NOM
(2) $281,646.83
(3) $250,000.00
IYR PMT = # PYR
(4) $261,911.43
PV # EFF

PMT # PYR

FV # NOM

#PYR

12. Fred and Mary have just received an inheritance of $250,000. Their plans are to purchase a house with a
$200,000 down payment after sailing around the world for three years. They have found a place to invest their
money at 10.5% per annum, compounded monthly for a three-year term. What is the maximum amount of their
inheritance they can use to purchase traveler’s cheques (which will be spent on their vacation) without sacrificing
their $200,000 down payment?

(1) $146,157.89
(2) $67,302.63 N J 2.
= # NOM
(3) $50,000.00
(4) $103,842.10 IYR PMT = # PYR

PV # EFF

PMT # PYR

FV # NOM

#PYR

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 MATH CLASS 3- PV, FV, YIELD
YIELD % QUESTIONS_________________________________________
13. Calculate the effective annual rate of interest which is equivalent to J2 = 12%.

(1) 12.3040301202%
(2) 12.6825030132% J = # NOM
(3) 12%
(4) None of the above J = # PYR

# EFF

# PYR

# NOM

14. On an interest accruing mortgage, which one of the following interest rates would result in the highest
outstanding balance?

(1) J12 = 14%

(2) J6 = 14%
(3) J4 = 14%
(4) J1 = 14%

15. Given a nominal rate of interest of 15.756%, the greater the frequency of compounding:

(1) The lower the effective annual rate.

(2) The higher the rate per compounding period.
(3) The higher the yield to the lender.
(4) The lower the payments to the borrower.

16. An investor plans to pay $200,000 for a vacant lot which he feels will sell at the end of three years for
$280,985.60. What effective annual interest rate will the investor earn? (Ignore real property taxes)

(1) 40.4928%
N J = # NOM
(2) 13.4976%
(3) 12%
IYR PMT = # PYR
(4) 11.3865515215%
PV # EFF

PMT # PYR

FV # NOM
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#PYR
 MATH CLASS 3- PV, FV, YIELD
17. Smiling Sue purchased a townhouse in March 1987 for $62,000. In March 1992, it was appraised at $140,000.
In March 1995, Smiling Sue sold the townhouse for $122,000. What was the pre-tax yield on her investment
expressed as an effective annual rate?

(1) 10.1527765839%
(2) 8.82934557901% N J 3.
= # NOM
(3) 9.90738584804%
(4) 10.7176969167% IYR PMT = # PYR

PV # EFF

PMT # PYR

FV # NOM

#PYR

18. An investor has negotiated to purchase a piece of raw land for $375,000. The investor believes that the land will
increase substantially in value, and that at the end of 3 years the land will sell for $483,400. What yield expressed
as an effective annual rate will the investor earn on this investment?

(1) 8.83246339998%
(2) 8.49386771967% N J 4.
= # NOM
(3) 17.6649268%
(4) 8.64559750925% IYR PMT = # PYR

PV # EFF

PMT # PYR

FV # NOM

#PYR

19. What is the nominal rate of interest, compounded semi-annually that is equivalent to 11 1/2% per annum,
compounded monthly?

(1) 5.8895333892% J = # NOM

(2) 11.830625%
(3) 11.7790667784% J = # PYR
(4) 5.9153125%
# EFF

# PYR
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# NOM
 MATH CLASS 3- PV, FV, YIELD
20. What is the monthly rate of interest equivalent to 15% per annum, compounded annually?

(1) 1.21263790946%
(2) 1.25% J = # NOM
(3) 1.33962098102% J = # PYR
(4) 1.17149169198%
# EFF

# PYR

# NOM

21. What is the effective annual rate of interest that is equivalent to 11 1/2 % per annum, compounded daily?

(1) 12.1853117673%
(2) 10.8870638418% J = # NOM
(3) 0.0315068493% J = # PYR
(4) 11.830625%
# EFF

# PYR

# NOM

22. The effective annual rate of interest for 19 5/8 % per annum, compounded monthly is:

(1) 19.625%
(2) 20.4450885734% J = # NOM
(3) 20.875%
J = # PYR
(4) 21.4900926903
# EFF

# PYR

# NOM

23. The effective annual rate of interest for 10% per annum, compounded semi-annually, is:

(1) Greater than the effective annual rate for 9% per annum, compounded semi-annually.
(2) More than the effective annual rate for 10% per annum, compounded annually.
(3) Less than the effective annual rate for 10% per annum, compounded monthly.
(4) All of the above

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 MATH CLASS 3- PV, FV, YIELD

24. An investor plans to pay $200,000 for a vacant lot which he feels will sell at the end of three years for
$280,985.60. What is the monthly interest rate the investor will earn? (Ignore real property taxes)

(1) 0.948879293%
(2) 1.404928% N J = # NOM
(3) 12%
(4) 2.87373447221% IYR PMT = # PYR

PV # EFF

PMT # PYR

FV # NOM

#PYR

25. George Ryker purchases a mortgage contract which will provide him with 60 monthly payments of $956. The
outstanding balance of the loan in the amount of $89,900 will be paid on the same day as the 60th payment. If
George pays $75,689 for this contract, what is his yield expressed as a monthly periodic rate?

(1) 1.58404489253%
(2) 1.35507837547%
(3) 1.46077536547%
(4) 1.40182220098% N J = # NOM

IYR PMT = # PYR

PV # EFF

PMT # PYR

FV # NOM

#PYR

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 MATH CLASS 3- PV, FV, YIELD
26. A constant payment mortgage is written for $148,951.77 and specifies payments of $1,537.03 per month for 25
years. The interest rate on this mortgage is:

(1) 0.975877399% per month

(2) 12.3599730404% per annum, compounded annually
(3) 0.0319332007% per day
(4) All of the above

N J 5.
= # NOM # NOM

IYR PMT = # PYR # PYR

PV # EFF # EFF

PMT # PYR # PYR

FV # NOM # NOM

#PYR

27. A constant payment mortgage is written for $48,951.77 and specifies payments of $520.00 per month for 15
years. The interest rate on this mortgage is:

(1) J2 = 11.5%
(2) J4 = 10.1637220669%
(3) J12 = 9.79781791304%
(4) All of the above

N J 6.
= # NOM # NOM

IYR PMT = # PYR # PYR

PV # EFF # EFF

PMT # PYR # PYR

FV # NOM # NOM

#PYR

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 MATH CLASS 3- PV, FV, YIELD
28. Mike Moneylender, an investor in mortgages, would prefer to earn which J2 = 20 J365 = 19.25
of the following yields?
# NOM
(1) J2 = 20% # PYR
(2) J1 = 21%
# EFF
(3) J365 = 19.25%
(4) Mike would be indifferent amongst the 3 yields quoted above # PYR
# NOM

29. An investor has the opportunity to invest in one of four alternative mortgages, each with the same degree of
risk. The only distinction between these investments is the rate of interest charged to the borrower. These rates
are:
Loan A: 13.25% per annum, compounded daily
Loan B: 13.50% per annum, compounded quarterly
Loan C: 13.75% per annum, compounded semi-annually
Loan D: 14.25% per annum, compounded annually
Assuming that the investor can purchase each mortgage for the same amount of money, which investment will he
prefer?

(1) Loan A
(2) Loan B Loan A: J = Loan B: J = Loan C: J = Loan D: J =
(3) Loan C
(4) Loan D # NOM # NOM # NOM # NOM
# PYR # PYR # PYR # PYR
# EFF # EFF # EFF # EFF
# PYR # PYR # PYR # PYR
# NOM # NOM # NOM # NOM

30. What rate of interest per compounding period would allow savers to "double their money" in 8 compounding
periods?

(1) 12.5% N J 7.
= # NOM
(2) 108.609279198%
(3) 25% IYR PMT = # PYR
(4) 9.05077326653%
PV # EFF

PMT # PYR

FV # NOM

#PYR

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 MATH CLASS 3- PV, FV, YIELD

31. A private investor expects to receive $300.00 per month for a period of 17 years as a result of a mortgage loan
she has just advanced. Calculate the investor's expected yield (expressed as a nominal rate with semi-annual
compounding) on her investment if the loan was in the amount of $23,250.

(1) 14.0409031891%
(2) 14.9806811419% N J 8.
= # NOM
(3) 14.458090210%
(4) 14% IYR PMT = # PYR

PV # EFF

PMT # PYR

FV # NOM

#PYR

32. A private investor expects to receive $281.72 per month for a period of 17 years as a result of a mortgage loan
he has just purchased for $21,000. Calculate the investor's expected yield (expressed as a nominal rate with semi-
annual compounding) on his investment.

(1) 14.9976796764%
(2) 15.2333744136% N J 9.
= # NOM
(3) 14.7712806265%
(4) 15.8135136537% IYR PMT = # PYR

PV # EFF

PMT # PYR

FV # NOM

#PYR

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 MATH CLASS 3- PV, FV, YIELD

33. A nominal interest rate of 8% per annum, compounded semi-annually is NOT equivalent to:

(1) An effective annual rate of 8.16%.

(2) 1.98039% per quarter.
(3) 4.85006% per annum, compounded monthly
(4) 7.84499% per annum, compounded daily

J = J = J = J =
PMT = PMT = PMT = PMT =
# NOM # NOM # NOM # NOM
# PYR # PYR # PYR # PYR
# EFF # EFF # EFF # EFF
# PYR # PYR # PYR # PYR
# NOM # NOM # NOM # NOM

34. A nominal interest rate of 18% per annum, compounded semi-annually is NOT equivalent to:

(1) an effective annual rate of 18.81%.

(2) 4.4030650891% compounded quarterly.
(3) 1.38884303484% compounded monthly.
(4) 0.0472318062% compounded daily

J = J = J = J =
PMT = PMT = PMT = PMT =
# NOM # NOM # NOM # NOM
# PYR # PYR # PYR # PYR
# EFF # EFF # EFF # EFF
# PYR # PYR # PYR # PYR
# NOM # NOM # NOM # NOM

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