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CHAPTER 1 TEST ANSWERS
1. a) 20 years
b) 232 months, or 19 years 4 months
c) The regular payment investment is worth about $5000. The single payment
investment has doubled to $7200, so it is worth more.
2. a) He would need 9.607… or 9.61% annual interest compounded every 2 weeks.
b) i) $66.51
ii) $812.22
c) It would take 10.4 years, or 10 years 21 weeks, for $3000 to grow to $6000.
3. a) $90 000
b) 3.36%
c) $56 661.21
d) The single payment would have the greater rate of return, because both
investments have the same future value but the single payment investment
required a much lesser amount to be invested.
4. a)
GIC:
RESP:
TFSA:
Value at end of first 10-year term is
Future value is
Future value
is
3105.938… which is reinvested.
8966.132…
2521.343…
Value at end of second 10-year term is
4823.428…
Total value is 4823.428… + 8966.132… + 2521.343… or $16 310.90
b) $10 400
5.
a) Greg’s portfolio:
GIC: 3337.359…
CSB: 1691.543…
Savings account: 6921.949…
Current value: $11 950.85
b) Greg’s portfolio:
Amount invested: $11 000
Total value of investment: $11 950.85
Rate of return: 1.086…
Greg has a slightly greater rate of return.
Lou’s portfolio:
Bond: $1112
CSB: 1085.388…
Savings account: 9597.126…
Current value: $11 794.52
Lou’s portfolio:
Amount invested: $11 000
Total value of investment: $11 794.52
Rate of return: 1.072…
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