Question 1

Marcie received an invoice for $150, with terms 2/15, net 30. Determine the effective annualized rate of return equivalent to the discount.

Accepted Answer

The answer of Marcie received an invoice for $150, with...

Question 2

If the holding-period return on a money market mutual fund for the most recent seven days is 0.111%, what current (simple) yield and effective annualized yield will be quoted for the fund in the financial press?

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The answer of If the holding-period return on a money...

Question 3

One year ago, Christos bought 1,000 units of the Dominion Aggressive Growth Fund at $20.35 per unit. Today a unit's value is $19.10. During the year, the fund made a distribution of $0.40 per unit. On this investment, what is Christo's:
a) Income yield?
b) Capital gain yield?
c) Total return in dollars?
d) Rate of total return?

Accepted Answer

The answer of One year ago, Christos bought 1,000 units...

Question 4

The current (simple annualized) yield on a money market mutual fund, based on the return for the most recent seven days, is 5.62%. What effective (annualized) yield will be reported for the fund?

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Question 5

An $8600 investment was worth only $7900 one year later. If the rate of total return for the year was -5%, how much income was received from the investment during the year?

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The answer of An $8600 investment was worth only $7900...

Question 6

A financial institution pays a simple interest rate of 6.7% on 30 to 179-day GICs of at least $100,000. What is the effective annualized rate of return:
a) On a 40-day GIC?
b) On a 160-day GIC?

Accepted Answer

The answer of A financial institution pays a simple interest...

Question 7

A $100,000 face value Treasury bill with 65 days remaining to maturity, was purchased to yield 4.5% per annum simple interest. What is the corresponding equivalent effective rate of return?

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Question 8

If the Halifax Real Estate Board reports that house prices increased by 8% during the first seven months of the year, and if prices continue to rise at the same rate for the subsequent five months, what will be the (compound) increase for the entire year?

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The answer of If the Halifax Real Estate Board reports...

Question 9

Three years ago, General Avionics announced plans to triple its annual R&D spending over the next 4 years. If R&D spending was increased by 25%, 30%, and 35% in the first 3 years, what minimum percent increase is required in the fourth year to reach the target?

Accepted Answer

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Question 10

What annually compounded interest rate is equivalent to 6% compounded:
a. semiannually?
b. quarterly?
c. monthly?

Accepted Answer

The answer of What annually compounded interest rate is equivalent...

Question 11

If the money supply increased from $331.12 billion to $333.81 billion in a single month, what were the simple and effective annualized rates of increase in the money supply during the month?

Accepted Answer

The answer of If the money supply increased from $331.12...

Question 12

If the Consumer Price Index rose by 1% over a two-month period, what were the simple and effective annualized rates of inflation during the two-month period?

Accepted Answer

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Question 13

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

Accepted Answer

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

Question 14

Kristina can invest in a two-year GIC for 5.85% compounded monthly or 6% compounded annually. Which option pays the most interest? Support your answer with calculations.

Accepted Answer

The answer of Kristina can invest in a two-year GIC...

Question 15

Gabriel received $200 of income from an investment during the past year. This represents an income yield of 4%. If the capital gain yield for the year was 10%, what was the value of the investment (not including income) at the end of the year?

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The answer of Gabriel received $200 of income from an...

Question 16

Jeff purchased some Mitel preferred shares on the Toronto Stock Exchange for $13.50. The shares pay a quarterly dividend of $0.50. Nine months later the shares were trading at $15.25. What was Jeff's rate of total return for the 9-month period?

Accepted Answer

The answer of Jeff purchased some Mitel preferred shares on...

Question 17

For a three-year investment, what rate compounded semiannually is equivalent to 4.6% compounded quarterly?

Accepted Answer

The answer of For a three-year investment, what rate compounded...

Question 18

What semiannually compounded interest rate is equivalent to 6% compounded:
a. annually?
b. quarterly?
c. monthly?

Accepted Answer

The answer of What semiannually compounded interest rate is equivalent...

Question 19

If an Index declined from 9614 to 9238 over a 50-day period, what were the simple and effective annualized rates of decline in the index during the period?

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Question 20

The current (simple annualized) yield, based on the holding-period return for the most recent 7 days, is reported for a money market mutual fund as 6.17%. What is the fund's corresponding effective (annualized) yield?

Accepted Answer

The answer of The current (simple annualized) yield, based on...

Quiz 9: Compound Interest: Further Topics and Applications