Exercises
Compounding, annuities and amortization
Problems to solve on your own. The final solution appears with the button below each problem; each exercise also has its own page, to share with the link.
1. Accumulated value under simple interest
Compute the accumulated value of a principal euros invested for months at the annual rate of under simple interest.
Solution available to those who have unlocked the subject.
2. Accumulated value under compound interest
Compute the accumulated value and the interest of a principal euros invested for years at the annual rate of under compound interest.
Solution available to those who have unlocked the subject.
3. Present value of a future amount
Compute the present value of euros available in years, at the annual rate of under compound interest.
Solution available to those who have unlocked the subject.
4. Commercial discount of a bill of exchange
A bill of exchange of euros matures in months. Compute the present value and the discount with commercial discount at the annual rate .
Solution available to those who have unlocked the subject.
5. Equivalent monthly rate
Compute the monthly rate equivalent to the annual rate of under compound interest, and compare it with the proportional monthly rate .
Solution available to those who have unlocked the subject.
6. Effective rate from a nominal rate
A deposit account offers the nominal annual rate of convertible quarterly. Compute the effective annual rate.
Solution available to those who have unlocked the subject.
7. Force of interest
Compute the force of interest equivalent to the annual rate of , and the accumulated value of euros after years under continuous compounding with this force of interest.
Solution available to those who have unlocked the subject.
8. Duration of an investment
Determine after how long a principal of euros, invested at per year under compound interest, reaches the accumulated value of euros.
Solution available to those who have unlocked the subject.
9. Arithmetic average due date
Three debts of , and euros are due in , and months. With commercial discount, determine the due date at which the sum of the three debts can be paid in a single amount.
Solution available to those who have unlocked the subject.
10. Present value of an annuity immediate
Compute the present value of an annuity immediate of annual payments of euros at the rate of .
Solution available to those who have unlocked the subject.
11. Installment of a constant-installment mortgage
A mortgage of euros is repaid by French amortization in annual installments in arrears at the rate of . Compute the installment and the interest portion of the first installment.
Solution available to those who have unlocked the subject.
12. One row of the Italian amortization schedule
A loan of euros is repaid by Italian amortization in annual installments at the rate of . Compute the principal portion, the interest portion and the installment of the fourth year, and the outstanding balance after the payment of the fourth installment.
Solution available to those who have unlocked the subject.
13. Perpetuity due
Compute the present value of a perpetuity of euros per year, paid at the beginning of each year, at the rate of .
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14. NPV and IRR of a two-year investment
An investment requires euros today and returns euros in one year and euros in two years. Compute the NPV at the rate of and the IRR.
Solution available to those who have unlocked the subject.