F30 – Unit 7 – Financial Mathematics – Investments Name: ____________________________Unit Practice Test Date: _____________________________

Unit 7 – Financial Mathematics – Investments – PRACTICE TEST

i = Prt, A = P + Prt or A = P(1 + rt) A=P(1+ rn )nt

A=P[ (1+ rn )nt

−1

rn

] 1. You deposit $500 into a savings account that earns 3.8% simple interest, paid daily. On the same day, your friend deposited $650 into a savings account that earns 2.9% simple interest, paid daily. a) How much money do you have after a year and a half?

b) How much money does your friend have after a year and a half?

c) Who makes more interest and by how much? (2 marks)

d) What is your rate of return? (1 mark)

e) What is your friend’s rate of return? (1 mark)

2. You have $4200 to invest. You want to go on a trip and have it grow to $6000 in five years. What simple interest rate would you need to invest into in order for your investment to reach this amount?

3. You are invested $15 000 for a down payment on a house at a simple interest rate of 5.2% paid annually. How long will it take to have enough for a down payment of $19 500.

F30 – Unit 7 – Financial Mathematics – Investments Name: ____________________________Unit Practice Test Date: _____________________________

4. You are investing money into an account that earns 2.2% simple interest, paid daily, for a 3 year term. How much would you have to invest in order to have $7 500 at the end of the term?

5. You want to buy something and you have $5000, which is half of what you need to buy it. If you invest your money at 4.3%, compounded annually, when can you buy it, to the nearest year?

6. You invest money at 3.4%, compounded daily. After 5 years, your investment is worth $1 540. How much did you originally invest?

7. You invest $8 500. You want it to grow to $12 000 in 6 years. What annual rate of interest, compounded quarterly, do you need to meet this goal?

8. You deposit $300 a month into a savings account for 4 years. You earn 6% interest, compounded semi-annually. What is the investment worth at the end of the 4 years? USE THE FORMULA TO FIND THIS ANSWER. Determine how much interest you earned and the rate of return.

F30 – Unit 7 – Financial Mathematics – Investments Name: ____________________________Unit Practice Test Date: _____________________________

9. For the following examples show your N, I/y, PV, PMT, FV, P/y and C/y values. Then solve for the value that you are looking for using the financial calculator.

a) What interest rate, compounded monthly, is required to make monthly payments of $50 grow to $2000 in 2 years?

b) How many years will it take for monthly payments of $450 to grow to more than $20 000 if the interest rate is 6.5%, compounded monthly?

c) You are depositing money into a savings account every 3 months for 7 years. You are earning 1.9% interest, compounded quarterly. At the end of 7 years you take your money out and have $35 600. How much did you deposit every three months?

F30 – Unit 7 – Financial Mathematics – Investments Name: ____________________________Unit Practice Test Date: _____________________________

10. Compare the following two portfolios for 15 years.Person 1 Person 2• The purchase, each year, of a $250 CSB that earns 5.5% compounded annually.

• A GIC of $5000 that earns 4.5% compounded quarterly

• Monthly deposits of $300 into a savings account that earns 3.3% compounded monthly.

• An investment of $5000 that earns 3.33% compounded quarterly.

• Weekly deposits of $75 into an account earning 4.15%

• A 7-year $200 bond that earns 2.95%, compounded quarterly; reinvested at the end or 7 years into an 8-year bond that earns 3.80%, compounded monthly

a) Determine how much each person invested.

b) How much is the first person’s portfolio worth?

c) How much is the second person’s portfolio worth?

d) What is the rate of return on each portfolio?

F30 – Unit 7 – Financial Mathematics – Investments Name: ____________________________Unit Practice Test Date: _____________________________

F30 – Unit 7 – Financial Mathematics – Investments Name: ____________________________Unit Practice Test Date: _____________________________

F30 – Unit 7 – Financial Mathematics – Investments Name: ____________________________Unit Practice Test Date: _____________________________

F30 – Unit 7 – Financial Mathematics – Investments Name: ____________________________Unit Practice Test Date: _____________________________

F30 – Unit 7 – Financial Mathematics – Investments Name: ____________________________Unit Practice Test Date: _____________________________