Note: b. might explain how much an “average” smoker could save in 12 years (assuming a constant price for cigarettes and a fixed interest rate).

^[2] $500.00 is deposited at the end of every six months for nine years in an account paying 10.0% compounded semi-annually. Calculate the accumulated value of the deposits.

^[3] Calculate the amount of interest included in the accumulated value of $600.00 deposits made at the end of each month for 5 years. The interest rate is 13.5% compounded monthly.

^[4] Bill Holden is preparing retirement plans for his employees. He requires each employee to deposit $265.00 at the end of each month for 9 years. The interest rate is 8.75% compounded monthly.

a. How much money will be in each employee’s account at the end of 9 years?

b. How much will each employee have actually contributed?

c. How much of the amount will be interest?

^[5] Corinne Smith made $2,750 deposits every 6 months into a registered retirement savings plan paying 11.25% compounded semi-annually. Just after making the 16th deposit, the interest rate changed to 10.00% compounded quarterly. If neither deposits nor withdrawals were made during the next five years, how much would Ms. Smith then have in her account?

^[6]  Calculate the present value of the ordinary annuity.

^[7] You wish to take two years off work to attend school and also wish to receive $950.00 at the end of every month for the 2  years. If you were able to deposit money into an account paying 10.00% compounded monthly:

a. How much should be deposited when you take the time off?

b. How much interest will you receive in the two years?

^[8] A laptop was bought by paying $750 down and an installment contract with payments of $85 at the end of each month for 2.5 years. If the interest was calculated at 16.9% compounded monthly:

a. What was the equivalent cash price of the laptop?

b. How much was the cost of the financing?

^[9] Peter Van Dusen opened a trust account to fund his son’s education. The account paid 10.25% compounded quarterly. His son is expected to require four years of quarterly payments of $2,000 with the first payment occurring 10 years 3 months from today. How much must Mr. Van Dusen deposit now so that his son will be able to receive the 4 years of payments? This is an example of a deferred annuity.

^[10] To purchase a new trawler-type yacht for chartering, Henry Skipper signed an agreement to borrow the entire amount and to make payments of $2,750 at the end of every month for seven years.

a. What was the purchase price of the yacht if money was worth 15.5% compounded monthly?

b. In his third year of operation, an economic downturn caused Mr. Skipper to miss payments 25 and 26. What payment was required at the time that payment 27 was due in order to bring the contract up to date?

c. Upon receipt of payment 27, the mortgage company wished to invoke a contractual clause and cancel the mortgage. How much (in addition to the payment calculated in part b above) would Mr. Skipper have to pay in order to fully pay out the mortgage?

^[11] Calculate the payment for each annuity:

^[12] A used Corvette can be bought for $15,000 cash or for equal payments at the end of each quarter for 5 years. Calculate the size of the quarterly payments at 10% compounded quarterly.

^[13] A gaming computer priced at $4,600 can be purchased for $1,900 down and the balance paid by 36 equal monthly payments at 13.8% compounded monthly. Calculate the size of the monthly payments.

^[14] Calculate the term of each annuity:

^[15] Charlie Horseshoe invested their $250,000 lottery winnings in a term deposit paying 8% compounded monthly for 10 years. For how long can $3,500 be withdrawn from the account at the end of each month, starting at the end of the term deposit? Does your answer make sense? If not, why not?