A bank offers the following choices for certificates of deposit:

The certificates mature at the end of the term. The bank does NOT permit early withdrawals. During the next 6 years the bank will continue to offer certificates of deposit with the same terms and interest rates. An investor initially deposits 10,000 in the bank and withdraws both principal and interest at the end of 6 years.

Calculate the maximum annual effective rate of interest the investor can earn over the 6-year period.

• 5.09%
• 5.22%
• 5.35%
• 5.48%
• 5.61%

References

Hlynka, Myron. "University of Windsor Old Tests 62-392 Theory of Interest". web2.uwindsor.ca. Retrieved November 23, 2023.

The parents of three children, ages 1, 3, and 6, wish to set up a trust fund that will pay X to each child three years from now, and Y to each child upon attainment of age 21. They will establish the trust fund with a single investment of Z.

Which of the following is the correct equation of value for Z?

• [[math]]\frac{X}{v^{17}+v^{15}+v^{12}}+\frac{Y}{v^{20}+v^{18}+v^{15}}[[/math]]
• [[math]]3\left(X v^{18}+Y v^{21}\right)[[/math]]
• [[math]]3 X v^3+Y\left(v^{20}+v^{18}+v^{15}\right)[[/math]]
• [[math]](X+Y) \frac{v^{20}+v^{18}+v^{15}}{v^3}[[/math]]
• [[math]]X\left[v^{17}+v^{15}+v^{12}\right]+Y\left[v^{20}+v^{18}+v^{15}\right][[/math]]

References

Hlynka, Myron. "University of Windsor Old Tests 62-392 Theory of Interest". web2.uwindsor.ca. Retrieved November 23, 2023.

An investor accumulates a fund by making payments at the beginning of each month for 6 years. Her monthly payment is 50 for the first 2 years, 100 for the next 2 years, and 150 for the last 2 years. At the end of the 7th year the fund is worth 10000. The annual effective interest rate is [math]\mathrm{i}[/math], and the monthly effective interest rate is [math]\mathrm{j}[/math].

Which of the following formulas represents the equation of value for this fund accumulation?

• [math]\ddot{s}_{\overline{24} \mid i}(1+i)\left[(1+i)^4+2(1+i)^2+3\right]=200[/math]
• [math]\ddot{s}_{\overline{24} \mid i}(1+j)\left[(1+j)^4+2(1+j)^2+3\right]=200[/math]
• [math]\ddot{s}_{\overline{24} \mid j}(1+i)\left[(1+i)^4+2(1+i)^2+3\right]=200[/math]
• [math]s_{\overline{24} \mid j}(1+i)\left[(1+i)^4+2(1+i)^2+3\right]=200[/math]
• [math]s_{\overline{24} \mid i}(1+j)\left[(1+j)^4+2(1+j)^2+3\right]=200[/math]

References

Hlynka, Myron. "University of Windsor Old Tests 62-392 Theory of Interest". web2.uwindsor.ca. Retrieved November 23, 2023.

If [math]s_{\overline{n}|} = 60[/math], [math]s_{\overline{2n}|} = 240[/math], find [math]s_{\overline{3n}|}.[/math]

• 700
• 730
• 760
• 770
• 780

References

Hlynka, Myron. "University of Windsor Old Tests 62-392 Theory of Interest". web2.uwindsor.ca. Retrieved November 23, 2023.

Two annuities have the same present value. The first annuity is a 12-year annuity-immediate paying $K per year. The second annuity is an 4-year annuity-immediate paying $2K per year. Both annuities are based on an annual effective interest rate of i, i > 0.

Determine i.

• 0.1185
• 0.1278
• 0.1312
• 0.136
• 0.142

References

Hlynka, Myron. "University of Windsor Old Tests 62-392 Theory of Interest". web2.uwindsor.ca. Retrieved November 23, 2023.

A perpetuity costs 77.1 and makes annual payments at the end of the year. The perpetuity pays 1 at the end of year 2, 2 at the end of year 3, . . . , n at the end of year (n + 1). After year (n + 1), the payments remain constant at n. The annual effective interest rate is 10.5%.

Calculate n.

• 17
• 18
• 19
• 20
• 21

References

Hlynka, Myron. "University of Windsor Old Tests 62-392 Theory of Interest". web2.uwindsor.ca. Retrieved November 23, 2023.

Deposits are made to a fund each January 1 and July 1 for the years 1995 through 2005. The deposit made each July 1 will be 10.25% greater than the one made on the immediately preceding January 1. The deposit made on each January 1 (except for January 1, 1995) will be the same amount as the deposit made on the immediately preceding July 1. The fund will be credited with interest at a nominal rate of 10%, compounded semiannually. On December 31, 2005, the fund will have a balance of 11000.

Determine the initial deposit to the fund.

• 160
• 165
• 175
• 195
• 200

References

Hlynka, Myron. "University of Windsor Old Tests 62-392 Theory of Interest". web2.uwindsor.ca. Retrieved November 23, 2023.

A perpetuity-immediate pays 100 per year. Immediately after the fifth payment, the perpetuity is exchanged for a 25-year annuity-immediate that will pay X at the end of the first year. Each subsequent annual payment will be 8% greater than the preceding payment. Immediately after the 10th payment of the 25-year annuity, the annuity will be exchanged for a perpetuity-immediate paying Y per year. The annual effective rate of interest is 8%.

Calculate Y.

• 110
• 120
• 130
• 140
• 150

References

Hlynka, Myron. "University of Windsor Old Tests 62-392 Theory of Interest". web2.uwindsor.ca. Retrieved November 23, 2023.

A person deposits 100 at the beginning of each year for 20 years. Simple interest at a rate of i per year grows the account to 2840 at the end of 20 years. If compound interest at the same rate i had been used, what would be the accumulated value in the account after 20 years?

• 2890
• 3100
• 3200
• 3310
• 3470

References

Hlynka, Myron. "University of Windsor Old Tests 62-392 Theory of Interest". web2.uwindsor.ca. Retrieved November 23, 2023.

A perpetuity pays 1 at the end of every year plus an additional 1 at the end of every second year. The present value of the perpetuity is K for i > 0.

Determine K.

• [[math]]\frac{i+3}{i(i+2)}[[/math]]
• [[math]]\frac{i+2}{i(i+1)}[[/math]]
• [[math]]\frac{i+1}{i^2}[[/math]]
• [[math]]\frac{3}{2 i}[[/math]]
• [[math]]\frac{i+1}{i(i+2)}[[/math]]

References

Hlynka, Myron. "University of Windsor Old Tests 62-392 Theory of Interest". web2.uwindsor.ca. Retrieved November 23, 2023.