EXERCISE ON COMPOUND INTEREST FORMULA & EFFECTIVE AND

NOMINAL RATES

1. A sum of money, X is deposited in a savings account at 10% compounded daily on 25 th

July 2015. On 13 August 2015, RM 600 is withdrawn and the balance as of 31 December
2015 is RM 8900. Calculate the value of X using exact time and 360-day year.
(RM 9112.37)

2. RM 25000 is invested for 4 years 9 months. If the investment is offered 12%

compounded semi-annually for the first 2 years and 10% compounded quarterly for the
rest of the period, find the future value of this investment.
(RM 41411.98)

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3. RM 65000 is invested for 6 years 9 months. If the investment is offered 5% compounded

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semi-annually for the first 2 years, 6% compounded monthly for the next 18 months and
7% compounded daily for the rest of the period, find the future value of this investment.

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(RM 98534.95)
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4. At the end of every year for three years, RM 1000 is invested in an account that offers 8%
compounded annually. Find the account amount at the end of the three years.
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(RM 3246.40)
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5. On 16 April 2013, RM 2000 was invested at 5% compounded semi-annually. Find the

amount accumulated on 16 October 2016 if the rate was changed to 8% compounded
quarterly beginning 16 April 2014.
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(RM 2561.41)
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6. Find the nominal rate, compounded semi-annually that is equivalent to 6% effective rate.
(5.91%)
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7. Find the annual effective rate that is equivalent to 8.2 % compounded daily (assume 360
days in a year)
(8.54%)
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8. Chow Fah deposited RM 1000 in a savings account at 3% compounded monthly. Find the
number of months required if she wanted the amount in the account to become RM
1498.54.
(162 months)

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 9. Find the nominal rate compounded every two months which is equivalent to 10%
compounded semi-annually.
(9.84%)

10. Given two interest rates (a) 9% compounded monthly and (b) 9.5% compounded every
four months, which of the two interest rates provides a better return?
( Effective rate r1 = 9.38%
Effective rate r2 = 9.8%.
9.5% compounded every 4 months gives better return)

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This study source was downloaded by 100000837819536 from CourseHero.com on 12-03-2021 00:42:32 GMT -06:00

https://www.coursehero.com/file/108580655/ANSWER-ON-COMPOUND-INTEREST-FORMULA-EFFECTIVE-AND-NOMINAL-RATESdocx/
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