Question 1

If an ordinary annuity with quarterly payments and a 5½-year term began June 1, 2010, what are the dates of the first and last payments?

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Question 2

Dr. Wilson is buying a 50% partnership in a veterinary practice by end-of- month payments of $714.60, including interest at 7% compounded semi- annually for 15 years.
a) What valuation was placed on the partnership at the beginning of the payments?
b) What total amount of interest will she pay over the 15 years?

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Question 3

Determine the future value:

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Question 4

A life insurance company quoted an annual premium of $387.50 (payable at the beginning of the year) for a $250,000 term insurance policy on a 35-year-old male nonsmoker. Alternatively, the insured can pay $33.71 at the beginning of each month by preauthorized electronic debit. Which payment plan would an applicant choose solely on the basis of money being worth 3.5% compounded monthly?

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Question 5

The Toronto Raptors announce the signing of their top draft pick to a "7-year deal worth $43.2 million." The player will earn $400,000 at the end of each month for the first three years, and $600,000 at the end of each month for the subsequent four years. How do the Raptors get the $43.2 million figure? To the nearest $1,000, what is the true current economic value of the deal if money can earn 7% compounded annually?

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Question 6

Gloria has just made her ninth annual $2,000 contribution to her Tax-Free Savings Account (TFSA). She now plans to make semi-annual contributions of $2,000. The first contribution will be made six months from now. How much will she have in her TFSA 15 years from now if the plan has earned and will continue to earn 5% compounded quarterly?

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Question 7

Assume that your client invests $1,000 at the end of each of the next three years. The investments earn 8% compounded annually. What is the future value at the end of the three years? (Taken from CIFP course materials.)

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Question 8

How much larger will the value of an RRSP be at the end of 25 years if the contributor makes month-end contributions of $300 instead of year-end contributions of $3600? In both cases the RRSP earns 6.5% compounded semi-annually.

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Question 9

Determine the future value:

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Question 10

Micheline wishes to purchase a 25-year annuity providing payments of $1,000 per month for the first 15 years and $1,500 per month for the remaining 10 years. Sovereign Insurance Co. has quoted her a rate of return of 5% compounded annually for such an annuity. How much will it cost Micheline to purchase the annuity from Sovereign?

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Question 11

Your client has systematically invested $1,000 at the end of each half-year for the past 17 years. The invested funds have earned 6.4% compounded semi-annually. What is the value of your client's investments today? (Taken from CIFP course materials.)

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Question 12

Determine the present value of the ordinary annuity:

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Question 13

Determine the future value

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Question 14

A seven-year capital lease of an executive jet requires semi-annual payments of $200,000 at the beginning of each six-month period. The company can borrow funds for seven years at 7.4% compounded semi-annually.
a. What long-term lease liability will the firm set up at the start of the term of the lease?
b. What liability will remain halfway through the term of the lease

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Question 15

Your client plans to invest $2,000 at the end of each year. The rate of return on the investment is 7.5% compounded annually. What will be the value of the investment at the end of 12 years? (Taken from CIFP course materials.)

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Question 16

Determine the present value of the ordinary annuity:

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Question 17

Determine the future value:

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Question 18

How much larger will the value of an RRSP be at the end of 20 years if the contributor makes month-end contributions of $500 instead of year-end contributions of $6,000? In both cases the RRSP earns 4.5% compounded semi-annually.

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Question 19

Suppose Evan contributes $2,000 to his RRSP at the end of every quarter for the next 15 years and then contributes $1,000 at each month's end for the subsequent 10 years. How much will he have in his RRSP at the end of the 25 years? Assume that the RRSP earns 6% compounded semi-annually.

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Question 20

Calculate the future value of investments consisting of payments of $800 at the end of each calendar quarter for seven years. The rate of interest earned will be 7% compounded quarterly for the first 30 months and 6% compounded semi-annually for the remainder of the annuity's term.

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Quiz 10: Annuities: Future Value and Present Value

If an ordinary annuity with quarterly payments and a 5½-year term began June 1, 2010, what are the dates of the first and last payments?

Determine the future value:

Assume that your client invests $1,000 at the end of each of the next three years. The investments earn 8% compounded annually. What is the future value at the end of the three years? (Taken from CIFP course materials.)

How much larger will the value of an RRSP be at the end of 25 years if the contributor makes month-end contributions of $300 instead of year-end contributions of $3600? In both cases the RRSP earns 6.5% compounded semi-annually.

Determine the future value:

Your client has systematically invested $1,000 at the end of each half-year for the past 17 years. The invested funds have earned 6.4% compounded semi-annually. What is the value of your client's investments today? (Taken from CIFP course materials.)

Determine the present value of the ordinary annuity:

Determine the future value

Your client plans to invest $2,000 at the end of each year. The rate of return on the investment is 7.5% compounded annually. What will be the value of the investment at the end of 12 years? (Taken from CIFP course materials.)

Determine the present value of the ordinary annuity:

Determine the future value:

How much larger will the value of an RRSP be at the end of 20 years if the contributor makes month-end contributions of $500 instead of year-end contributions of $6,000? In both cases the RRSP earns 4.5% compounded semi-annually.

Suppose Evan contributes $2,000 to his RRSP at the end of every quarter for the next 15 years and then contributes $1,000 at each month's end for the subsequent 10 years. How much will he have in his RRSP at the end of the 25 years? Assume that the RRSP earns 6% compounded semi-annually.

Calculate the future value of investments consisting of payments of $800 at the end of each calendar quarter for seven years. The rate of interest earned will be 7% compounded quarterly for the first 30 months and 6% compounded semi-annually for the remainder of the annuity's term.