5 Investment Math Sheet PDF

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BBI20 Savings and Investment Math 1. Assume that you have purchased a $5000 GIC that earns 3.5 % per annum on Jan 1, 2018. Calculate the simple and compound interest and total value of the GIC at the end of 5 years by completing the tables below.

Year 2019 2020 2021 2022 2023 2024 Total Value

Simple Interest Interest Total

Compound Interest Year Interest Total

2019 2020 2021 2022 2023 2024 Total Value

Total Value

2. Imagine you have inherited $25 000 and have decided to make various investments to increase the value of your inheritance. Each investment is made at the beginning of the year and then liquidated or sold at the end of the year. January 1 Purchased shares of stock for $7000 Purchased a $2000 GIC paying 6 % annually Invested $5000 in mutual funds Purchased a rare baseball card for $4400 Bought an interest in a time-sharing condominium for $5800 Deposited the remaining $800 into a savings account December 31 Received $600 in dividends during the year and sold stock for $7990 GIC matured and was worth $2120 when redeemed Liquidated mutual funds for $5900 Sold baseball card for $5100 Sold interest in condominium for $5100 $832 was in savings account when closed a) How much money was earned on each investment during the year? Show your

calculations in the spaced provided. Stock GIC Mutual funds Baseball card Condominium Savings account

BBI20 Savings and Investment Math b) What was the rate of return on each of these investments? Show your calculations

in the spaced provided. Stock GIC Mutual funds Baseball card Condominium Savings account

c) Which investment seemed to be the best one?

d) Which investment seemed to be the worst one?

3. Enrique bought a house three years ago for $165 000 and made a $35 000 down payment. His monthly mortgage payment, for principal and interest, is $1050. Enrique estimates that, in the first several years, 90% of the monthly payment goes to paying the interest, while the remaining 10% is applied to the principal. Enrique recently received a major promotion at work that will require him to move to another city. Reluctant as he may be to move since he invested into his home, the new job offer is too good to pass. Answer each of the following questions related to Enrique’s home, and show calculations where appropriate. a)

How much equity did Enrique have when he first purchased his house?

b)

After 3 years, how much equity does he have in his house now? (Hint: the down payment + the amount of principal paid on the mortgage to date)

c)

How much interest on the mortgage has Enrique paid over the 3 years?

d)

In considering whether or not to move, Enrique had his house appraised (valued) and found that he could sell it immediately for $187 000 (after selling expenses). How much cash would he be left with after paying off the existing mortgage on the house?

e)

How much money has Enrique made, if any, on the sale of his house?...