Question 1

Belleville Credit Union has established interest rates on its three-year GICs so that the effective rate of interest is 7% on all three compounding options. What are the monthly, semiannually, and annually compounded rates?

Accepted Answer

The answer of Belleville Credit Union has established interest rates...

Question 2

Suppose the periodic rate for 6 months is 4%. Is the equivalent periodic rate for three months (pick one):
(i) equal to  ?
(ii) less than 2%?
(iii) greater than 2%?
Answer the question without doing any calculations. Explain your choice.

Accepted Answer

The answer of Suppose the periodic rate for 6 months...

Question 3

To be equivalent to 10% compounded annually, what must be the nominal rate with:
a. semiannual compounding?
b. quarterly compounding?
c. monthly compounding?

Accepted Answer

The answer of To be equivalent to 10% compounded annually,...

Question 4

To be equivalent to 10% compounded quarterly, what must be the nominal rate with:
a. annual compounding?
b. semiannual compounding?
c. monthly compounding?

Accepted Answer

The answer of To be equivalent to 10% compounded quarterly,...

Question 5

What quarterly compounded rate is equivalent to 7.5% compounded semiannually?

Accepted Answer

The answer of What quarterly compounded rate is equivalent to...

Question 6

A trust company pays 5.5% compounded semiannually on its three-year GICs. For you to prefer an annually compounded GIC of the same maturity, what value must its nominal interest rate exceed?

Accepted Answer

The answer of A trust company pays 5.5% compounded semiannually...

Question 7

A credit union pays 5.25% compounded annually on five-year Compound Interest: Further Topics GICs. It wants to set the rates on its semiannually and monthly compounded GICs of the same maturity so that investors will earn the same total interest. What should be the rates on the GICs with the higher compounding frequencies?

Accepted Answer

The answer of A credit union pays 5.25% compounded annually...

Question 8

Calculate the income yield, capital gain yield, and rate of total return in each of 2005 and 2006 for Loblaw Companies' share and Mawer New Canada Fund units. Use the data in Tables 9.3, and 9.4.

Accepted Answer

The answer of Calculate the income yield, capital gain yield,...

Question 9

Calculate the income yield, capital gain yield, and rate of total return in each of 2005 and 2006 for Cameco Corporation shares and Sprott Canadian Equity Fund units. Use the data in Tables 9.3 and 9.4.

Accepted Answer

The answer of Calculate the income yield, capital gain yield,...

Question 10

Calculate the income yield, capital gain yield, and rate of total return in each of 2005 and 2006 for Research in Motion shares and PH&N Bond Fund units. Use the data in Tables 9.3, and 9.4.

Accepted Answer

The answer of Calculate the income yield, capital gain yield,...

Question 11

Assume that the TD Bank shares in Table 9.3 will pay a $2.04 per share dividend in 2007. What must the share price be at the end of 2007 for a total rate of return in 2007 of 10%?

Accepted Answer

The answer of Assume that the TD Bank shares in...

Question 12

Loblaw shares in Table 9.3 will pay a $0.84 dividend in 2007. What must the share price be at the end of 2007 for a total rate of return in 2007 of 7%?

Accepted Answer

The answer of Loblaw shares in Table 9.3 will pay...

Question 13

The following table presents the rates of total return in successive years from 2004 to 2008 for the AGF Canadian Stock Fund and for the benchmark Toronto Stock Exchange S&P/TSX Composite Index. By how much did the mutual fund's overall percentage return exceed or fall short of the Index's growth?

Accepted Answer

The answer of The following table presents the rates of...

Question 14

The following table presents the rates of total return in successive years from 2004 to 2008 for the Ethical Growth Fund and for the benchmark Toronto Stock Exchange S&P/TSX Composite Index. By how much did the mutual fund's overall percentage return exceed or fall short of the Index's growth?

Accepted Answer

The answer of The following table presents the rates of...

Question 15

The following table presents the rates of total return in successive years from 2004 to 2008 for the Sceptre Canadian Equity Fund and for the benchmark Toronto Stock Exchange S&P/TSX Composite Index. By how much did the mutual fund's overall percentage return exceed or fall short of the Index's
  growth?

Accepted Answer

The answer of The following table presents the rates of...

Question 16

The following table presents the rates of total return in successive years from 2004 to 2008 for the Sprott Canadian Equity Fund and for the benchmark Toronto Stock Exchange S&P/TSX Composite Index. By how much did the mutual fund's overall percentage return exceed or fall short of the Index's growth?

Accepted Answer

The answer of The following table presents the rates of...

Question 17

The home the Bensons purchased 13 years ago for $85,000 is now appraised at $215,000.
What has been the annual rate of appreciation of the value of their home during the 13- year period?

Accepted Answer

The answer of The home the Bensons purchased 13 years...

Question 18

One thousand shares of Frontier Mining were purchased at $6.50 per share. The share price rose 110% in the first year after purchase, declined 55% in the second year, and then dropped another 55% in the third year.
a) What was the percent change in share price over the entire three years?
b) How much (in dollars and cents) did the share price drop in the second year?

Accepted Answer

The answer of One thousand shares of Frontier Mining were...

Question 19

You are offered a loan at a rate of 10.5% compounded monthly. What would a semiannually compounded nominal rate have to be below to make it more attractive?

Accepted Answer

The answer of You are offered a loan at a...

Question 20

A company's annual report states that the prices of its common shares had changes of 23%, 10%, -15%, and 5% during the past 4 fiscal years. If the shares were trading at $30.50 just after the 5% increase in the most recently completed year.
a) What was the price of the shares at the beginning of the 4-year period?
b) How much (in dollars and cents) did the price decline in the third year?

Accepted Answer

The answer of A company's annual report states that the...

Quiz 9: Compound Interest: Further Topics and Applications

Belleville Credit Union has established interest rates on its three-year GICs so that the effective rate of interest is 7% on all three compounding options. What are the monthly, semiannually, and annually compounded rates?

Suppose the periodic rate for 6 months is 4%. Is the equivalent periodic rate for three months (pick one): (i) equal to ? (ii) less than 2%? (iii) greater than 2%? Answer the question without doing any calculations. Explain your choice.

To be equivalent to 10% compounded annually, what must be the nominal rate with: a. semiannual compounding? b. quarterly compounding? c. monthly compounding?

To be equivalent to 10% compounded quarterly, what must be the nominal rate with: a. annual compounding? b. semiannual compounding? c. monthly compounding?

What quarterly compounded rate is equivalent to 7.5% compounded semiannually?

A trust company pays 5.5% compounded semiannually on its three-year GICs. For you to prefer an annually compounded GIC of the same maturity, what value must its nominal interest rate exceed?

Calculate the income yield, capital gain yield, and rate of total return in each of 2005 and 2006 for Loblaw Companies' share and Mawer New Canada Fund units. Use the data in Tables 9.3, and 9.4.

Calculate the income yield, capital gain yield, and rate of total return in each of 2005 and 2006 for Cameco Corporation shares and Sprott Canadian Equity Fund units. Use the data in Tables 9.3 and 9.4.

Calculate the income yield, capital gain yield, and rate of total return in each of 2005 and 2006 for Research in Motion shares and PH&N Bond Fund units. Use the data in Tables 9.3, and 9.4.

Assume that the TD Bank shares in Table 9.3 will pay a $2.04 per share dividend in 2007. What must the share price be at the end of 2007 for a total rate of return in 2007 of 10%?

Loblaw shares in Table 9.3 will pay a $0.84 dividend in 2007. What must the share price be at the end of 2007 for a total rate of return in 2007 of 7%?

The following table presents the rates of total return in successive years from 2004 to 2008 for the AGF Canadian Stock Fund and for the benchmark Toronto Stock Exchange S&P/TSX Composite Index. By how much did the mutual fund's overall percentage return exceed or fall short of the Index's growth?

The following table presents the rates of total return in successive years from 2004 to 2008 for the Ethical Growth Fund and for the benchmark Toronto Stock Exchange S&P/TSX Composite Index. By how much did the mutual fund's overall percentage return exceed or fall short of the Index's growth?

The home the Bensons purchased 13 years ago for $85,000 is now appraised at $215,000. What has been the annual rate of appreciation of the value of their home during the 13- year period?

You are offered a loan at a rate of 10.5% compounded monthly. What would a semiannually compounded nominal rate have to be below to make it more attractive?