UNIVERSITY OF TECHNOLOGY, JAMAICA

SCHOOL OF MATHEMATICS AND STATISTICS

ACF2011: FINANCIAL MATHEMATICS I
TUTORIAL SHEET 2

1. Find the accumulated value of $2000 invested for 4 years, if the rate of interest is 8%
compounded annually.

2. Find the accumulated value of $5000 at the end of 5 years and 4 months invested at 9%
compounded annually.

3. An investor age 35 deposits $10,000 in a fund earning 7% annual compound interest until
retirement at age 65. Find the amount of interest earned (a) between ages 35 and 45, (b)
between ages 45 and 55, and (c) between ages 55 and 65.

4. Bianca and Rochelle each opens up new bank accounts at time 0. Bianca deposits 100
into her bank account, and Rochelle deposits 50 into hers. Each account earns the same
annual effective interest rate.
The amount of interest earned in Bianca's account during the 11th year is equal to X. The
amount of interest earned in Rochelle's account during the 17th year is also equal to X.
Calculate X.

5. Find the accumulated value of $1000 over 5 years and 7 months at i(2)  13 12 %.

6. Find the compound interest on $1000 for 2 years at 12% compounded semiannually.

7. On July 10, 2018, $7500 was invested in a fund paying i(4)  8%. How much will be in
this fund on October 10, 2021?

8. Find the accumulated value of $500 invested for 5 years at 8% compounded quarterly.

9. Find the accumulated value of $500 after 173 months at a rate of interest of 14%
compounded quarterly, assuming compound interest throughout.

10. Fifteen hundred dollars is invested for 18 months at a nominal rate of 13%. Find the
accumulated value, if interest is compounded monthly.

11. An amount of $6580 was invested in an education fund at i(12)  6% on a child’s 12th
birthday, February 28, 2014. How much will be in the fund when the 18-year-old child
goes off to college at the end of August? How much interest will the fund earn?
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12. Find the compound amount of $4500 invested for 8 years and 6 months at (a) i (2)  12%,
(b) i (4)  6%, (c) i (12)  7%, and (d) i(12)  8%.

13. Find the compound interest on $1000 at (a) i(12)  6% for 5 years and (b) i(12)  15% for
30 years.

14. Find the accumulated value and the amount of compound interest earned on an
investment of $10,000 for 10 years at a nominal rate of 12% compounded weekly.

15. A person deposited $1000 into a retirement savings plan on February 4, 2008. How much
money will be in the plan on February 4, 2028, at 11.4% compounded daily?

16. You invest $5000 in a 2-year certificate of deposit (CD) crediting 6% compounded
quarterly. If the CD is redeemed early, the credited rate will be reduced to 4%
compounded quarterly for the final 3 months of the period of investment. Find the
amount you would receive if the CD is redeemed after 18 months.

17. From 2014 to 2019, the earnings per share of common stock of a company increased
from $4.71 to $9.38. What was the compounded annual rate of increase?

18. Find the annual rate of interest such that an amount of money will triple itself in 15 years.

19. A fund increased 85% during the last 5 years. Find the annual compound rate of interest
earned.

20. A fund increased 175% during a 10-year period. Find the nominal rate of interest
compounded semiannually earned.

21. If an investment increased from $180,000 to $214,100 in 2 years and 6 months, find the
nominal rate compounded quarterly.

22. An investment fund advertises that it will triple your money in 10 years. What rate of
interest compounded monthly is implied?

23. At time 0, Erica deposits 200 into a savings account, which pays simple interest at an
annual rate of i.
At time 0, Michelle deposits 100 into a different savings account, which pays interest at a
rate of i compounded annually.
Erica and Michelle earn the same amount of interest during the 8th year.
Calculate i.
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24. Brianna and Rachel each opens up new bank accounts at time 0. Brianna deposits $1000
into her bank account, and Rachel deposits $500 into hers. Each account earns the same
annual effective interest rate, i.
The amount of interest earned in Brianna's account during the 11th year is equal to X. The
amount of interest earned in Rachel's account during the 17th year is also equal to X.
Calculate i.

25. Janna Pope borrows $1000 at 15% interest compounded annually.

(a) How much does she owe after 2 years?
(b) In how many years will her principal have accumulated to $2000?

26. Find the length of time necessary for $1000 to accumulate to $1500, if invested at 6% per
annum compounded semiannually.

27. How long will it take $2600 to grow to $5000 at i(4)  6.5%?

28. How long will it take $2000 to accumulate $800 interest at 10% compounded quarterly, if
compound interest is allowed for the fractional part of a compounding period?

29. How long will it take $5500 to grow to $8000 at i(12)  7%?

30. If an investment doubles in value in 6 years at a certain rate of interest compounded

monthly, how long will it take for the same investment to triple in value?

31. Lois opens a bank account with 1000 and lets it accumulate at an annual nominal interest
rate of 6% convertible semiannually. Danielle also opens a bank account with 1000 at the
same time as Lois, but it grows at an annual nominal interest rate of 3% convertible
monthly.
For each account, interest is credited only at the end of each interest conversion period.
Calculate the number of months required for the amount in Lois’s account to be at least
double the amount in Danielle’s account.
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ANSWERS

1. $2720.98 2. $7917.32

3. (a) $9671.51 (b) $19,025.33

(c) $37,425.71

4. 38.88 5. $2073.84

6. $262.48 7. $9702.05

8. $742.97 9. $3635.22

10. $1821.06 11. $9709.09, $3129.09

12. (a) $12,117.48 (b) $7465.48

(c) $8144.55 (d) $8862.43

13. (a) $348.85 (b) $86,541.00

14. $33,155.30, $23,155.30 15. $9773.20

16. $5440.28 17. 14.77%

18. 7.60% 19. 13.09%

20. 10.38% 21. 7.00%

22. 11.04% 23. 10.41%

24. 12.25%

25. (a) $1322.50 (b) 4.96 years

26. 6.86 years 27. 40.57 quarters

28. 13.63 quarters 29. 64.42 months

30. 114.12 months 31. 288