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Find Related Questions by Tags, levels, etc.
a. If N250,000 is invested in an account that earns 4% per year compound interest, what is the:
i. value of the investment after 5 years? (3 Marks)
ii. total interest earned? (2 Marks)
b. When it was apparent that your parents could not afford to finance your university education, you sought and obtained a 4-year loan of N250,000.00 from Education Bank Limited. The bank imposed a simple interest rate of 7½%.
i. How much do you need to pay off the bank now
(4 years after) that you are through with your study?
(7 Marks)
ii. If you decide to be paying N25,000 every month from now and the bank agreed to reduce the interest rate to 1% per month on the unpaid balance at the beginning of the month, how much additional total interest will be paid? (8 Marks)
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Find Related Questions by Tags, levels, etc.
A barber invests N100,000 for 5 years. At the end of the investment period, he receives a cash transfer of N120,600 as final settlement of the investment.
Required:
Use logarithm (to base 10) to determine the compound interest rate on the investment.
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Nike Kenny is a student of a state-owned polytechnic in Yobe. She planned to save N5,000 each year out of the emolument she collects from the work-study club of a school. How much will she have at the end of the tenth year if interest on her savings is 6% compounded semi-annually?
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Larry wishes to save money towards his new-born daughter’s wedding. He intends to save ₦50,000 on the first day of every 6 months for 18 years, starting immediately. The account pays interest of 6% compounded semi-annually. What will be the balance on the account at the end of 18 years?
A. ₦3,258,748.33
B. ₦4,368,748.34
C. ₦5,278,748.33
D. ₦6,588,748.33
E. ₦6,788,748.33
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Find Related Questions by Tags, levels, etc.
Suppose Bonde invested N240,000 in a savings account that paid interest twice in a year. After 8 years, the money had accumulated to N380,980. What was the annual compound interest rate?
A. 3.64%
B. 4.75%
C. 5.86%
D. 6.65%
E. 6.76%
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Suppose N1 million is deposited in a money deposit bank that is paying 7.5% interest per annum compounded annually. What will be the compound amount at the end of the third year?
A. N1,242,300
B. N1,243,400
C. N1,344,500
D. N1,345,600
E. N1,446,700
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Maame TorTor borrows GH¢3,000.00 and agrees to pay interest quarterly at an annual rate of 8%. At the same time, she sets up a sinking fund in order to repay the loan at the end of 5 years. The sinking fund earns interest at the rate of 6% compounded semi-annually.
Required:
Determine the size of each semi-annual sinking fund deposit. (5 marks)
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a) Kofy Addo invested GH¢4,000 into his bank account at the beginning of every year for four years. The bank paid interest at 8% compounded annually for the first four years. Thereafter, the interest rate changed to 8.35%, but Kofy Addo did not make any more deposits. At the end of the sixth year, he withdrew GH¢5000.
Required:
i) Calculate the size of the investment at the end of the sixth year, before the withdrawal.
ii) Calculate the size of the investment after the withdrawal in the sixth year.
iii) Calculate the balance in the account after the eighth year.
b) Kofy Addo decided to start saving money for his future. At the end of each month, he deposited GH¢500 into an account at Trust Bank, which earned an interest rate of 9% per annum compounded monthly.
Required:
i) Determine the balance of Kofy Addo’s account after 20 years. (4 marks)
ii) Calculate the amount deposited into the account over the 20-year period. (2 marks)
iii) Calculate how much interest he earned over the 20-year period. (2 marks)
iv) Calculate the effective annual rate of interest. (2 marks)
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You have received a prize amount of GH¢5,000 and you wish to invest it for five years. The two alternatives are to use a bank account where the 14% per annum gross rate is compounded monthly or a savings fund where the 14.5% per annum gross rate is compounded annually.
Required:
i) Calculate the size of each fund at the end of the five years. (Ignore tax considerations). (8 marks)
ii) Calculate the effective annual interest rate of the bank account investment. (4 marks)
iii) Advise your client on the basis of your calculations. (2 marks)
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Find Related Questions by Tags, levels, etc.
KuKu invested GHS 2000.00 into a Deluxe Equity Fund.
Required:
(i) Determine how long it will take for the GHS 2000.00 investment to accumulate GHS 800.00 interest at 10% compounded quarterly, if the interest is allowed for the fractional part of a conversion period (1 month = 30 days).
(ii) Determine how long it will take the GHS 2000.00 investment to triple in value if it doubled in value in 6 years at a certain rate of interest compounded monthly (1 month = 30 days).
(iii) Determine the interest rate in (ii).
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Find Related Questions by Tags, levels, etc.
Odapagyan Foods Ltd is borrowing GH¢500,000 to finance a project involving an expansion of its existing factory. It has obtained an offer from Sika Bank. The terms of the loan facility are as follows:
Required:
i) Compute the quarterly installment.
(3 marks)
ii) Prepare a loan amortization schedule to show the periodic interest charges, installment payments, principal payments, and balance of the loan at the end of each quarter.
(7 marks)
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Trimpo Ltd can invest funds in Ghana’s financial market at 15% per annum. Presently, the Treasury Manager of the company is considering investing GH¢100,000.
Required:
Determine the length of time it will take to double the investment (round your answer to the nearest year). (4 marks)
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Klassiq Fashion Plc has raised GH¢10 million from a share offer to its shareholders to finance market expansion projects in West Africa. The money will be deposited into an interest-bearing account and withdrawn in bits within regular time intervals during the next two years. The first withdrawal will occur at the end of the first quarter. Subsequent withdrawals will occur at the end of each of the subsequent quarters for the next two years. The fund in the account will earn interest at 18% per annum with quarterly compounding.
Required:
i) Suppose the first withdrawal amount is GH¢2.25 million. Compute the account balance immediately after the first withdrawal. (3 marks)
ii) Suppose subsequent quarterly withdrawals from the account are even for the next two years, compute the size of each withdrawal. (3 marks)
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An online university is setting up an endowment fund for the financing of scholarship grants. A total of GH¢200 million has been raised through fundraising events. This amount will be invested continuously for 5 years before disbursements will be made from the fund. The Trustees of the Endowment Fund have received a tentative investment strategy from the appointed Investment Manager.
Below is an extract from the tentative investment strategy:
“The seed money will be invested in fixed-income securities and negotiated short-term investments to secure the protection of the principal while earning stable returns over the 5-year gestation period. To achieve this objective, the seed money will be invested as follows: 60% in Government of Ghana 91-day Treasury Bills, 40% in 6-month fixed deposit accounts with top-class universal banks in Ghana. Over the 5-year gestation period, the maturity value of each round of investment will be rolled over as they mature.”
Being the only Trustee with expertise in finance, your fellow Trustees have asked you to do some simulations to inform them about the growth of the fund in the gestation period based on the tentative investment strategy.
Required:
i) Suppose the annual nominal interest rate on the Government of Ghana 91-day Treasury bills will be 15.2514% in year 1, 15.4814% in year 2, 15.7565% in year 3, 15.9478% in year 4, and 16.2146% in year 5. Compute the terminal value of that component of the investment at the end of the fifth year. (5 marks)
ii) Suppose the average nominal interest rate on the fixed deposits will be 16.5% over the next five years. Compute the terminal value of that component of the investment at the end of the fifth year. (3 marks)
iii) Considering the proposed strategy that the maturity value of each round of investment is rolled over as they mature, explain whether the interest that would accrue on the investment over the entire investment period would effectively be a simple interest. (2 marks)
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