

UNIT
9 :
MATHEMATICS OF INVESTMENT
LESSON 7:
UNIT 9 TEST
Test Questions:
1. Compare the following investments. Which is better?
a) $30 000 invested for 8 years at 7.2%/a, compounded
semiannually.
b) $30 000 invested for 8 years at 7.2%/a,
compounded monthly.
c) $30 000 invested for 8 years at 7.2%/a,
compounded daily.
2. On the birth of their grandson, Barb and Lee wish to invest for his
education. If the investment pays
6.6%/a, compounded monthly, how much should they invest today in order to
provide $30 000 when he turns 18?
3. Stuart plans to buy a new trenching machine
in 10 years to replace the current one.
He will need $50 000 at this time.
How much should he set aside each month to achieve this goal if interest
is 6%/a, compounded monthly?
4. At the end of each year for 15 years the
Frieda deposits $3000 into an investment account which pays 6.6%/a, compounded
annually. If she then leaves this
amount to accumulate for another 10 years without any further yearly deposits
at the same rate, how much will she have accumulated at this time?
5. The Barton foundation wishes to establish an
academic athletic scholarship to be awarded each year for 15 years. The scholarship will be worth $1200 per
year. How much should be deposited now
in a trust fund that pays 5.4%/a, compounded annually?
6. Evaluate
the following general annuity.
Include a complete time line diagram.
$850 every 6 months for 12 years at 7.2%/a,
compounded quarterly.
7.
The Adams family purchased a cottage on Big Straggle Lake for $180
000. They paid 25% down, financing the
rest with a mortgage over 20 years with interest at 6.6%/a, compounded
semiannually .
a) Determine the monthly payment.
b) Determine the total interest paid over the
25 year period.