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Aimst University Faculty of Business and Management Financial Mathematics

This document contains a tutorial on financial mathematics with 15 practice problems involving calculating future and present values using compound interest formulas. The problems cover a range of scenarios involving different interest rates, compounding periods, investment amounts and time horizons. The goal is to calculate future and present values, interest earned, and other financial metrics.

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Cw Chen
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71 views

Aimst University Faculty of Business and Management Financial Mathematics

This document contains a tutorial on financial mathematics with 15 practice problems involving calculating future and present values using compound interest formulas. The problems cover a range of scenarios involving different interest rates, compounding periods, investment amounts and time horizons. The goal is to calculate future and present values, interest earned, and other financial metrics.

Uploaded by

Cw Chen
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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AIMST UNIVERSITY

FACULTY OF BUSINESS AND MANAGEMENT

FINANCIAL MATHEMATICS

TUTORIAL 2

1. Find the future value of RM1,000 which was invested for


(a) 4 years at 4% compounded annually,
(b) 5 years 6 months at 14% compounded semi-annually,
(c) 2 years 3 months at 4% compounded quarterly,
(d) 5 years 7 months at 5% compounded monthly,
(e) 2 years 8 months at 9% compounded every 2 months,
(f) 250 days at 10% compounded daily.

2. RM1,000 is invested for three years. Find the interest received at the end of the three years if
the investment earns 8% compounded annually.

3. Suppose that RM2,000 is deposited at a compound interest rate of 6% annually. Find (a) the
total account value after 12 years and (b) the total interest earned in those 12 years.

4. RM9,000 is invested for 7 years 3months. This investment is offered 12% compounded
monthly for the first 4 years and 12% compounded quarterly for the rest of the period. Based
on the question:
(a) Draw the time line
(b) Calculate the future value of this investment.

5. Suppose that you deposit RM2,500 in an account paying 7% interest that compounds annually
for 4 years. Fill in the missing values in the table below, which shows how your account value
would grow:
Solutions:
Year Start of Year Interest End of Year
1 RM2,500.00
2
3
4

6. A debt of RM3,000 will mature in three years’ time. Find


(a) the present value of this debt,
(b) the value of this debt at the end of the first year,
(c) the value of this debt at the end of four years,
assuming money is worth 14% compounded semi-annually.
7. How much would you need to deposit today into an account paying 6.52% annually
compounded interest in order to have RM5,000 in 3 years?

8. Jake’s bank statement shows that he has RM4,268.97 in a fixed deposit certificate that he
opened 4 years ago. The account’s interest rate has been 5.04% compounded annually. How
much did he originally deposit?

9. Determine the present value if the future value is RM300, the interest rate is 11 5 ⁄ 8 %
compounded annually, and the term is 10 years.

10. Find the accumulated value of RM1,000 for six months at 10% compounded continuously.

11. Find the future value of RM5,000 at 8% interest for 5 years, assuming that the interest
compounds continuously.

12. RM100 is deposited every 3 months for 2 years and 9 months at 8% compounded quarterly.
What is the future value of this annuity at the end of the investment period? How much
interest is earned?

13. RM300 was invested every month in an account that pays 10% compounded annually for 18
months. Calculate the amount in the account after 18 months. How much interest was
earned?

14. Raymond has to pay RM300 every month for 24 months to settle a loan at 12% compounded
monthly.
(a) Compute the original value of the loan.
(b) Find the total interest that he has to pay.

15. James intends to give a scholarship worth RM5,000 every year for six years. How much must
he deposit now into an account that pays 7% per annum to provide the scholarship?

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