Math 323 Final Exam Spring 2022

Last name: __________________ First name:____________________

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Note: There are 10 problems in this exam and each problems counts 10 points for a total of 100 points. All final answers are rounded to the
nearest hundredth. The instructor reserves the right to ask for a zoom question session with a student on the exam results if questions arises.

#1 Suppose that the growth of money for the next five years is governed by the linear accumulation function
a(t) = 1+.08t . If you wish to invest $10,000 now and an additional $X two years from today so as to accumulate a total of
$26,000 future value six years from now, what is the value of X?

#2 On April 1, 1998, John opened a savings account with a nominal interest rate of 3.4% payable monthly by making a
$100 deposit. At the same time he set up an investment fund with a nominal interest rate of 4.6% payable quarterly. John
deposited $400 into the investment fund at the end of each quarter with his first payment being on July 1, 1998. The quarterly
interest payments from the fund were directly deposited into the 3.4% savings account. Find the balance (FV) in the 3.4%
savings account on July 1, 2003, just after the twentieth interest deposit is received from the 4.6% fund and monthly interest
0f 3.4% has been credited.

#3 A participant in a pension plan aged 25 currently earns $20,000 per year. This participant plans to contribute 6% of
salary at the end of each year into the pension fund for 40 years. Find the accumulated value at age 65 of these contributions,
if the participant receives annual 3% salary increases until retirement and if the pension fund earns 6% effective per year.

#4 A loan is being repaid with 20 payments of $2000 followed by 10 payments of $1000 at the end of each half-year. If the
nominal rate of interest convertible quarterly is 12%, find the outstanding loan balance immediately after 15 payments have
been made by the retrospective method.

#5 A loan of $20,000 was originally scheduled to be repaid by 25 equal annual payments at the end of each year. An extra
payment 𝑅́ with each of the 6th through the 10th scheduled payments will be sufficient to repay the loan 5 years earlier than
under the original schedule. Solve for 𝑅́.

#6 Madi took out a $140,000 mortgage loan with level annual payments at the end of each year for 20 years on
which the effective rate of interest is equal to 8%. At the end of 8 years after he paid the 8th annual payment, he
wanted to make a payment of $20,000 to reduce the remaining loan balance. The lender agreed to allow Madi to
do so and pay off the remaining balance in another 12 level annual payments at the same rate. Find the revised
annual payment which would result for the remainder of the loan.

#7 A borrower takes out a loan of $2000 for two years. Construct a sinking fund schedule if the lender receives
10% effective on the loan and if the borrower replaces the amount of the loan with semiannual deposits in a
sinking fund earning a nominal rate of discount at 8% convertible semiannually.

#8 A ten-year $2,000 8% par-value bond with semi-annual coupons is bought for $2,200. Approximate the
effective yield rate per coupon period j by using the approximation formula (1 + 𝑗)𝑛 ≈ 1 + 𝑛𝑗.

#9 A six-year $1,800 8.5% bond with semiannual coupons is bought for $1,918 and is redeemable for $1,860.
Find the principal adjustment P5, the interest earned I5, and the book value B5 at the end of two-and-a-half years.

#10 You are given the following selected values from a yield curve: Term Spot rate
(1) Find the present value of payments of $1000 made at the end of 1 year 6.00%
each year for five years using these spot rates. 2 year 8.00
(2) What level yield rate would produce an equivalent value? 3 year 9.00
4 year 9.25