MAP4C. Annuities and Mortgages Assignment.

Name_____________ Date________

Answers Part 1. Questions 1-27. Problem Solving Personal Finance.

Answer all questions. Use additional paper as required and attach them to this report.
You may have to complete some of this work on your own time, using computers,
and/or the internet.
1. How many months in each time period?
Years

Months

5 years

60

10 years

120

20 years

240

25 year

300

30 years

360

2. How many weeks are in each time period?

[2 marks]

[2 marks]

Number of Weeks
2 years

104

5 years

260

20 years

1040

30 years

1560

3. Depositing $100 per month means depositing how much in each time period? [2
marks]
Amount ($)
5 years

6000

10 years

12000

20 years

24000

25 year

30000

30 years

36000

MAP4C. Annuities and Mortgages Assignment. Name_____________ Date________

4. Earning $40 000 in one year means earning an average of how much in each time
period? [3 marks]
Time
Period

Amount ($)
Note: This column
header shows
$symbol, so the
numbers below do
not need to show
the $ symbol.

Calculations

40000/12=3333.333333333333

a month

3333.33

one week

769.23

one day

109.59

40000/52=769.2307692307692
40000/365=109.5890410958904
3333.33*6.5 = 21666.645

six and a
half
months

21666.65

three
months

10000.00

Three months = .25 year.

$40000/4 = $10000

5. How many payments are made in one year for each payment frequency? [3 marks]
Number of
Frequency payments per
year.
Monthly

12

quarterly

semiannually

Weekly

52

bi-weekly

26

semimonthly

24

6. State whether or not the year shown is a leap year.

[3 marks]

MAP4C. Annuities and Mortgages Assignment. Name_____________ Date________

a) Year 2012? Explain how we know.
Yes, the year 2012 was a leap year since 2012/4 = 503, which is a whole
number; and year 2012 is not a multiple of 400.
b) Year 2013? Explain how we know.
No, the year 2013 is not a leap year. [2013/4 = 503.25, which is not a
whole number.]
c) The year that will you turn age 65 is______. Is it a leap year? How do you
know?
Answers may vary.
7. Calculate the value of the following exponential expressions:

[3 marks]

a) 1000(1+0.0325)1
= 1032.50
b) 1000(1.0325)60
= 6814.023385
c) 1000(1.0325)-60
= 146.75617
8. a) State the compound interest formula in terms of A, P, i, and n. A=P(1+i)n
b) Rewrite the compound interest formula A=P(1+i)n in terms of FV, PV, i, and n.
FV=PV(1+i)n
[2 marks]

MAP4C. Annuities and Mortgages Assignment. Name_____________ Date________

9. True or False? Multiplying a value by one will result in a larger value. Give an
example. [1 mark]
10. True or False? Multiplying any positive number by a number greater than one will
result in a larger value. [1 mark]

11. True or False? Multiplying any positive value by a number between zero and one
will result in a larger value. [1 mark]

12. True or False? The number 0.804 is greater than the number 0.84. [1 mark]

13. True or False? The number 1 + an increase of 5% is greater than one. [1 mark]

14. True or False? A 5% decrease in value can be found by multiplying the initial value
by 0.95. [1 mark]

15. True or False. A 5% increase in value can be found by multiplying the initial value
by 1.05. [1 mark]

16. True or False. Another way of saying per year is per annum. [1 mark]

17. True or False. Another way of writing per annum is /a. For example, 6%/a. [1
mark]

18. True or False. A series of equal payments, or deposits, paid at regular intervals is
called an annuity. [1 mark]

MAP4C. Annuities and Mortgages Assignment. Name_____________ Date________

19. True of False. Understanding math improves the likelihood of making good
financial decisions. Justify the statement. [1 mark]
Justifications may vary.
20. True or False. The interest rate per compounding interval is often represented as
the variable lowercase i.
[1 mark]

21. True or False. The compound interest formula A=P(1+i)n can also be written as the
future value formula FV = PV(1+i)n. [1 mark]

22. How is an annuity different from a one-time investment? Show the difference
visually using time lines. [2 marks]
Draw a timeline diagram showing a single investment compounding over time.
Draw an annuity timeline diagram showing many regular deposits (or
investments) with EACH of them compounding over time.
Compare the results of the two different situations.

MAP4C. Annuities and Mortgages Assignment. Name_____________ Date________

23. Show step-by-step how the future value formula, FV = PV(1+i)n, can be rearranged
to give us the present value formula, PV = FV(1+i)-n.
[2 marks]

Step

Statement

How do we know this is true?

FV=PV(1+i)n

Given.

FV/(1+i)n=[PV(1+i)n]/(1+i)n

Divide both sides by (1+i)n.

FV(1+i)-n=PV

Left side: Exponent rule.

Right side: Simplify.

PV= FV(1+i)-n

Rearrange: If a=b, then b=a.

24. How many semi-monthly payments will be made if payments are made for a period
of one year? Explain your reasoning. [1 mark]
There are twelve months in a year. There are 2 semi-monthly intervals each month. So,
twenty four semi-monthly payments will be made.
25. How many bi-weekly payments will be made if payments are made for a period of
one year? Explain your reasoning. [1 mark]
There are fifty-two weeks in a one year. Biweekly means every second week. So, there
are twenty-six biweekly payments is one year.
26. Solve 8000 = 1.005n. Do not round.
[Hint: Use log button. n = log(8000)/log(1.005) ]

[2 marks]

n=1801.9292272095066471810794768141
27. Solve 9000 = X60. Round to 6 d.p.

[2 marks]

Given 9000 = x60

Then 9000(1/60) = (x60)(1/60)

[Raise both side to exponent (1/60)]

Then 0.016667 approx. = x

[Right side: Power of a power rule simplification.

Left side: Simplify power.]