Test 1 Review (Chapter 11)

• Test 1 will take place on Blackboard (not MyMathLab); click on “Test 1” on left side menu of
Blackboard.
• You must use the formula if the question instructs you to use the formula! Formulas will be
provided.
• When using the BA II plus keys, list all variables & values for full marks
• Include appropriate units ($, %)
• When finding n, round up to the nearest whole number…. only round down when very, very
close to a whole number (i.e. 12.001 → round to 12).
o Round value appropriately before converting to years + months

1. What is the maturity value of $330 payments made at the end of each 6-month
use formulas for questions 1, 2, 3 and 6

period for 10 years if interest is 9.5% compounded semi-annually?

2. Reggie is planning to retire in 30 years. He sets up a savings plan depositing $155

at the end of each month for the next 20 years, then leaving the accumulated
contributions for another 10 years until he retires. The account offers 4.2%
compounded monthly. How much money will Reggie have in his account in 30
years?

3. Polly is saving to buy a house. She deposits $500 at the end of each 3-month
period for 7 years into an account earning 4.8% compounded quarterly. After the 7
year contribution period, the account was left untouched for a further 3 years,
earning interest at 6% compounded semi-annually.
a) How much will Polly have in her account after 7 years?
b) How much will Polly have in her account after 10 years?
c) How much did Polly contribute?
d) How much will be interest?

4. Kareem will be repaying a loan with $710 payments at the end of every 3 months for
4 years. What is the amount of the loan if interest is 5.8% compounded quarterly?

5. A printing shop will be buying a copier machine with a $2000 down payment and
monthly payments at the end of each month for $300 for the next 4 years. Interest on
the payment plan is 9% compounded monthly.
a) What is the purchase price of the copier machine?
b) How much was the cost of financing? (i.e. how much interest will be paid)

6. A $22 000 contract will be paid by payments at the end of each 6 month period for
the next 3 years. What is the size of the semi-annual payments if money is worth 8.3%
compounded semi-annually?

(𝟏+𝒊)𝒏 −𝟏 𝟏 − (𝟏+𝒊)−𝒏
FVn = PMT[ ] PVn = PMT[ ]
𝒊 𝒊
7. At the beginning of grade 10, Calvin decides to deposit an amount at the end of
every month for three years to have $18 000 saved to begin university. How much will
Calvin need to deposit to save $18 000 if interest is 7.92% compounded monthly?

8. Shen bought a studio condominium as an investment property, with a 20% down

payment on the purchase price of $395 000, and mortgaging the balance over 25 years
with quarterly equal payments at the end of every 3 months. What is the size of the
quarterly payments if interest is 7.05% compounded quarterly?

9. When Kai was born, his grandmother deposited $1000 at the end of every year, into
an account offering 3.1% compounded annually. She made deposits for 22 years until
he entered graduate school. After his 22nd birthday, the money was transferred into an
account offering 5% compounded quarterly, and Kai was permitted to make equal
withdrawals at the end of each 3 month period for the next 4 years. How much will Kai
receive every 3 months?

10. You deposit a $6000 cash prize from winning a golf tournament today. For how
long can you withdraw $250 at the end of each month, if interest is 10.2% compounded
monthly, and the first withdrawal is in one month from today?

11. Ben saved $800 to deposit at the end of each 6 month period into an account
offering 7.3% compounded semi-annually. What is the term of the annuity if he wants to
save $10 000?

12. A $37 000 loan is paid back with $2000 payments at the end of every 3 month
period for five and a half years. What is the nominal rate of interest (compounded
quarterly) charged on the loan?

13. A property valued at $86 250 was purchased with a 15% down payment and the
balance repaid with $2100 payments at the end of each month for 40 months. Find the
nominal rate of interest (compounded monthly) on the payments.

14. Eli saved $15 000 by saving $100 at the end of each month for 11 years through a
payroll savings plan.
a) What is the nominal rate of interest (compounded monthly) on the savings
plan?
b) After 11 years, Eli converts the account to annuity that will allow him to
withdraw $150 at the end of each month. How many withdrawals will Eli be able
to make?

𝐅𝐕 𝒊 𝐏𝐕 𝒊
PMT = [ 𝒏 ] PMT = [ 𝒏 ] FV = PV(1 + i)n
( 𝟏+𝒊)𝒏 −𝟏 𝟏 − (𝟏+𝒊)−𝒏
PV = FV(1 + i)-n