Questions and Answers of Fundamentals of Business Mathematics in Canada

Henrick can buy a rural property from a family member for $700,000 with terms of $100,000 down and the balance payable over 20 years by payments at the end of each quarter including interest at 5%
If $300,000 is used to purchase an annuity earning 4.5% compounded monthly and paying $2500 at the end of each month, what will be the term of the annuity? Include the final, smaller annuity payment
Sofia has been approved for a RBC Royal Bank four-year $25,000 car loan at 7.5% com-pounded monthly. What end-of-month payments will reduce the balance on the loan after four years to the expected
Suppose that you contribute $425 per month to your RRSP. Rounding up to the nearest month, how much longer will it take for the RRSP's value to reach $500,000 if it earns 4.2% compounded annually
Rentown advertised a computer at a cash price of $1699 and at a rent-to-own rate of $129 at the beginning of each month for 24 months. What effective rate of interest is a customer paying to acquire
The interest rate on a $30,000 loan is 4.5% compounded monthly. What end-of-month payments are required to pay off the loan in eight years?
In order to purchase another truck, Beatty Transport recently obtained a $50,000 loan for five years at 5.8% compounded semiannually. The loan is structured to reduce the balance owing to $10,000 at
How much longer will it take month-end RRSP contributions of $500 to accumulate $500,000 than month-end contributions of $550? Assume that the RRSP earns 3.75% compounded monthly. Round the time
Owen has just received an inheritance of $20,000. He has deposited the funds into an account that will earn 5% compounded quarterly. Owen plans to add to his savings by making end-of month deposits
How much longer will it take monthly payments of $1000 to pay off a $100,000 loan if the monthly compounded rate of interest on the loan is 5.25% instead of 4.875%?
Anne has already saved $6,400. She will deposit this into a savings account that earns 4.1% compounded semiannually. Anne's goal is to have a total of $75,000 in six gears from now. How much will she
On the day she was born, Ella's grandparents deposited $2500 into a savings account to help fund her education. To that account they made equal deposits on each of Ella's birthdays, including her
What duration of annuity paying $5000 at the end of every quarter can be purchased with $200,000 if the invested funds earn 3.5% compounded semiannually? Include the final, smaller annuity payment in
A car dealer offered $1250 cash back or 1.9% factory financing over 60 months" to purchasers of selected new vehicle models. A customer financed $30,000 at the low interest rate instead of paying
Fletcher Machine Shop has decided to lease a piece of equipment for eight gears rather than finance the purchase of the equipment at an interest rate of 7.2% compounded monthly. It has set up a long
Bonnie and Clyde want to take a six-month leave of absence from their jobs to travel extensively in South America. Rounded to the next-higher month, how long will it take them to save $40,000 for the
How many fewer deposits will it take to accumulate savings of $100,000 with beginning-of month deposits of $220 than with beginning-of-month deposits of $200? The savings earn 5.4% compounded monthly.
What payments must be made at the end of each quarter to an RRSP earning 4.2% compounded annually so that its value 8 1/2 years from now will be $15,000?
Louise wants to retire in 20 years with enough savings in her RRSP to be able to purchase a 25-year annuity that will pay her $4000 at the end of every month. She has already accumulated $50,000 in
Ernie's Electronics sells an HD LED television priced at $2395 for $100 down and payments of $100 per month, including interest at 9.6% compounded monthly. How long after the date of purchase will
$3500 will be contributed to an RRSP at the end of every six months for 20 years. What effective rate of return must the plan earn if it is to be worth $250,000 at the end of the 20 gears?
a. How long will it take monthly payments of $400 to repay a $50,000 loan if the interest rate on the loan is 8% compounded semiannually?b. How much will the time to repay the loan be reduced if the
Mr. Schwartz used the $245,000 available in his RRSP to purchase an annuity that will pay him $2000 at the beginning of every month. If the funds in the annuity earn interest at 6% compounded
Four years from now, Tim and Justine plan to take a year's leave of absence from their jobs and travel through Asia, Europe, and Africa. They want to accumulate enough savings during the next four
a. Mrs. Gobi will make end-of-quarter deposits of $850 to her RRSP. The fund earns 4% compounded semiannually. Rounding It upward, how long will it take for the funds in the RRSP to grow to
Beth and Nelson want to accumulate a combined total of $600,000 in their RRSPs by the time Beth reaches age 60, which will be 30 years from now. They plan to make equal contributions at the end of
The McGowans are arranging a $220,000 mortgage loan from their bank. The interest rate on the loan will be 4.9% compounded semiannually.a. What will the end-of-month payments be if the loan has a
Dr. Collins wants the value of her RRSP 30 years from now to have the purchasing power of $500,000 in current dollars.a. Assuming an inflation rate of 2% per year, what nominal dollar amount should
Using the "Cool Million" Chart An interactive "Cool Million" (found in the "Interactive Charts" under the Student Resources for Chapter 11) enables you to visualize the growth of your retirement
Twelve years ago, Mt Lawton rolled a $17,000 retiring allowance into an RRSP that subsequently earned 7% compounded semiannually. Three years ago he transferred the funds to a Registered Retirement
Harold's RRSP is already worth $56,000. Rounded to the next-highest month, how long will it take the RRSP to reach $250,000 if additional contributions of $2000 are made at the end of every six
Dana's RRSP investment account currently has a balance of $21,963.32. She intends to continue to deposit $700 at the end of every quarter. If her investments earn 5% compounded semiannually, how long
A 70-year-old man can purchase either of the following annuities for the same price from a life insurance company. A 20-year-term annuity will pay $394 at each month-end. A life annuity will pay $440
An advertisement for Ford trucks offered "2.9%" financing (for 48 months) or $4000 cash back." A truck buyer financed $40,000 at the low interest rate instead of paying $36,000 cash (after the $4000
A magazine offers a one-year subscription rate of $63.80 and a three-year subscription rate of $159.80, both payable at the start of the subscription period. Assuming that you intend to continue the
Mr. Braun wants the value of his RRSP 25 years from now to have the purchasing power of $400,000 in current dollars.a. Assuming an inflation rate of 2.5% per year, what nominal dollar amount should
Georgina is about to retire with $188,000 in her RRSP. She will use the funds to purchase an annuity providing payments of $6000 at the end of each quarter. What will be the annuity's term if the
Noreen's RRSP is currently worth $125,000. For the next 10 years, she will make contributions at the end of every six months. How much does Noreen need to contribute at the end of every six months
A deferred annuity is comprised of eight annual payments of $1500. What is the period of deferral if the present value of the payments, discounted at 4.9% compounded annually, is $8037.87?
Janine borrowed $27;000 from her bank. Monthly payments are $750, including interest at 6% compounded quarterly.a. How many payments will Janine make altogether?b. How much is the last
What amount of money invested now will provide payments of $500 at the end of every month for five years following a four-year period of deferral? The money will earn 3.8% compounded monthly.
Jie wishes to purchase a five-gear annuity that will pay quarterly payments of $750. The first payment will be paid 3 years and 9 months from today. How much will Jie pay today for this annuity if it
Chantal will make year-end contributions for 30 years to an RRSP earning 5% compounded annually.a. How much will she have after 30 years if the annual contribution is $2000?b. How much more will she
If money can earn 4% compounded annually, how much more money is required to fund an ordinary perpetuity paying $1000 at the end of every year, than to fund an ordinary annuity paying $1000 per year
What minimum initial amount of money, invested today to earn 6% compounded monthly, will support a monthly payout of $500 for 3 1/2 years if the first payment occurs 2 years and 10 months from now?
A perpetuity is to pay $10,000 at the end of every six months. How much money is required to fund the perpetuity if the money can be invested to earn 4% compounded semiannually?
How much will it cost to purchase a 20-year indexed annuity in which the end-of-quarter payments start at $5000 and grow by 2% compounded quarterly? Assume that the money used to purchase the annuity
A company's preferred shares pay a $1.25 dividend every three months in perpetuity. What is the fair market value of a share just after payment of a dividend if the rate of return required by the
A charitable organization is raising money to fund an animal shelter. The organization would like to donate $2000 at the end of every month in perpetuity to help offset the shelter's operating costs.
Randall wants to accumulate $750,000 in his RRSP by the end of his 30-year working career. What should be his initial year-end contribution if he intends to increase the contribution by 3% every year
How much will it cost to purchase a three-year annuity that provides end-of-month payments that start at $2000 and grow by 1.5% compounded monthly? The funds in the annuity earn 6% compounded monthly.
What amount of money invested now will provide quarterly payments of $1350 for eight years, if the ordinary annuity is deferred for 21 years and the money earns 4.2% compounded monthly?
For $30,000, Manny purchased a deferred annuity from an insurance company that will pay him quarterly payments of $852.48 for 121 years. The payments are based upon the purchase amount earning 4.1%
Mrs. Kirkpatrick (age 65) is about to begin receiving a CPP retirement pension of $11,000 per year. This pension is indexed to the Consumer Price Index (CPI). Assume that the annual pension will be
Mr. Larsen's will directed that $200,000 be invested to establish a perpetuity making payments at the end of each month to his wife for as long as she lives and subsequently to the Canadian Heart
Ronelda has accumulated $49,248.55 in her RRSP. If she makes no further contributions and her RRSP continues to earn 4.5% compounded monthly, for how long a period of deferral must she wait before
An old agreement requires a town to pay $500 per year in perpetuity to the owner of a parcel of land for a water well dug on the property in the 1920s. The well is no longer used, and the town wants
Mrs. McTavish wants CO establish an annual $5000 scholarship in memory of her husband. The first scholarship is to be awarded two years from now. if the funds can earn 4% compounded annually, what
Maritime Bank recently announced that its next semiannual dividend (to be paid six months from now) will be $1 per share. A stock analyst's best estimate for the growth in future dividends is 4%
A $65,000 loan, bearing interest at 8% compounded quarterly was repaid, after a period of deferral, by quarterly payments of $3821.85 over 10 years. What was the time interval between the date of the
Marion's grandfather's will established a trust that will pay her $1500 every three months for 11 years. The first payment will be made 6 years from now, when she turns 19. If money is worth 3.5%
A city sells plots in its cemetery for $1000 plus an amount calculated to provide for the cost of maintaining the grounds in perpetuity. This cost is figured at $25 per plot due at the end of each
The dividends on the common shares of Mosco Inc. are forecast to grow at 10% per year for the next five years. Thereafter, the best guess is that the annual dividend will grow at the same 3% annual
Using an inheritance he recently received, Sam wants to purchase a deferred annuity that will pay $5000 every three months between age 60 (when he plans to retire) and age 65 (when his permanent
Dean has already implemented the first stage of his financial plan. Over a 30-year period, he will continue to increase his annual year-end RRSP contributions by 2% per year. His initial contribution
Arif used $300,000 of RRSP savings to purchase a 25-year annuity from which he will receive end-of month payments. The money used to purchase the annuity will earn 4.8% compounded monthly. The
What minimum amount will have to be dedicated today to a fund earning 3.6% compounded quarterly, if the first quarterly payment of $2000 in perpetuity is to occura. Three months from now?b. Five
How much more money is required to fund an ordinary perpetuity than a 25-year ordinary annuity, if the funds can earn 4% compounded quarterly, and both pay $500 monthly?
Negotiations between Delco Manufacturing and the union representing its employees are at an impasse. The union is seeking a 3% wage increase. Deko's offer is 1% The employees have passed a vote
The common shares of Unicorp. are forecast to pay annual dividends of $2 at the end of each of the next five years, followed by dividends of $3 per year in perpetuity. What is the fair market value
Tarin will make savings deposits at the end of every year for 10 years. The first deposit will be $1000. Subsequent deposits will increase by 2% annually, to match her expected annual wage increases.
A $20,000 investment will be allowed to grow at 4.5% compounded semiannually until it can support semiannual withdrawals of $1000 for 20 years. Rounded to the nearest month, how long before the first
A wealthy benefactor has donated $1,000,000 to establish a perpetuity that will be used to support the operating costs of a local heritage museum scheduled to open in three years' time. If the funds
Mrs. Corriveau has just retired at age 58 with $299,317 in her RRSP. She plans to live off oilier savings for a few years and allow her RRSP to continue to grow on a tax-deferred basis until there is
The common shares of Bancorp Ltd. are forecast to pay annual dividends of $3 at the end of each of the next five years, followed by dividends of $2 per year in perpetuity. What is the fair market
Kenneth borrowed $5000 today at a rate of 6.6% compounded quarterly. The loan will be repaid with equal quarterly payments for two years. The first payment will occur in nine months from today.
Cynthia currently has $185,000 in her RRSP. She will make no further contributions, but will allow this fund to accumulate interest at 6% compounded semiannually for the next 10 years. At that point,
As of Brice's 54th birthday, he has accumulated $154,000 in his Registered Retirement Savings Plan (RRSP). What size of end-of-month payments in a 20-year annuity will these funds purchase at age 65
$10,000 was invested in a fund earning 2.4% compounded monthly. How many monthly withdrawals of $300 can be made if the first occurs 3 1/2 years after the date of the initial investment? Count the
You have just received a $35,000 gift from your parents, representing your share of the sale of the family cottage. You will invest this money, then use it to fund a round the world trip that you
Leslie received a settlement when her employer declared her job redundant. Under special provisions of the Income Tax Act, she was eligible to put $22,000 of the settlement in an RRSP. Fifteen years
Novell Electronics recently bought a patent that will allow it to bring a new product to market in 2 1/2 years. Sales forecasts indicate that the product will increase the quarterly profits by
Dave and Morley borrowed $20,000 from Dave's father to make a down payment on a house. The interest rate on the loan is 4% compounded annually, but no payments are required for two years. The first
Mrs. O'Reilly donated $500,000 to Medicine Hat College for a perpetual scholarship fund for women in business studies. What amount can be awarded on each anniversary, if the scholarship fund earns
Bernice is about to retire with $139,000 in her RRSP. She will make no further contributions to the plan, but will allow it to accumulate earnings for another six years. Then she will purchase an
A $40,000 loan at 3.6% compounded monthly will be repaid by monthly payments over 10 years. a. Calculate the interest component of Payment 35.b. Calculate the principal component of Payment
A $145,000 mortgage loan carries an interest rate of 5.2% compounded semiannually, a five-year term, and a 30-year amortization period. Payments will be made at the end of every month.a. Calculate
The interest rate on a $14,000 loan is 5.4% compounded semiannually. Semiannual payments will pay off the loan in seven years.a. Calculate the interest component of Payment 10. b. Calculate the
The interest rate on a $200,000 mortgage loan is 5% compounded semiannually.a. Calculate the monthly payment for each of 15-year, 20-year, 25-year, and 30-year amortizations.b. By what percentage
Golden Dragon Restaurant obtained a $9000 loan at 5% compounded annually to replace some kitchen equipment. Prepare a complete amortization schedule if the loan is repaid by semiannual payments over
A five-year loan of $25,000 at 5.2% compounded quarterly requires quarterly payments.a. Calculate the interest component of Payment 10. b. Calculate the principal component of Payment
A $200,000 mortgage loan has a 25 year amortization.a. Calculate the monthly payment at interest rates of 6%, 7%, and 8% compounded semiannually.b. By what percentage does the monthly payment on the
Valley Produce received $50,000 in vendor financing at 3.8% compounded semiannually for the purchase of harvesting machinery. The contract requires equal annual payments for seven years to repay the
Metro Construction received $60,000 in vendor financing at 6.5% compounded semiannually for the purchase of a loader. The contract requires semiannual payments of $7500 until the debt is paid off.
The Graftons can afford a maximum mortgage payment of $1500 per month. The current interest rate is 5.2% compounded semiannually. What is the maximum mortgage loan they can afford if the amortization
Niagara Haulage obtained an $80,000 loan at 5.4% compounded monthly to build a storage garage. Construct a partial amortization schedule for payments of $1000 per month showing details of the first
Ted borrowed $4000 at 6% compounded monthly to purchase a used car. Payments of $475 will be made at the end of every month. There will also be a final, smaller payment. Construct the full
The Tarkanians can afford a maximum mortgage payment of $1000 per month. What is the maximum mortgage loan they can afford if the amortization period is 25 years and the interest rate isa. 5.5%
The interest rate on a $6400 loan is 5% compounded semiannually. If the loan is to be repaid by monthly payments over a four-year term, prepare a partial amortization schedule showing details of the
The 100 Mile Market borrowed $13,000 for renovations to their building. The loan carries interest at 6% compounded quarterly. Payments of $1750 will be made at the end of every month, plus a final,

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