Exercises

1. The lesson discussed two investment categories which have tax implications: RRSPs and TFSAs. Fill in the following table with information from the lesson.

   Account	Full Name	Types of holdings (e.g., chequing account, GIC, etc.)	Is the principal deducted from taxable income?	Is the interest earned tax-free?
   TFSA
   RRSP

2. Four different investment types were discussed in the lesson:
   • Chequing Accounts
   • Savings Accounts
   • GICs
   • Mutual Funds

   Write each one in the correct space on the graph below. 

   

3. Aled wishes to borrow \($3000\) in order to buy equipment for his new career as a chef. His bank tells him that they will charge simple interest at a \(4.8\%\) annual rate for a two-year loan.

   However, before he goes ahead, his friend finds another lender who will charge the same total amount of simple interest but will give Aled \(3\) years to pay back the loan. 

   1. What is the total amount of interest which Aled expects to pay to the bank? 
   2. What is the annual interest rate charged by the new lender? 
4. Zaira invested \($1200\) in an account that earns \(3\%\) simple interest per year. Joshua invested \($1000\) in an account that earns \(4.5\%\) simple interest per year. Interest is paid to each account at the end of each year. Neither Zaira nor Joshua make any additional deposits or withdrawals. After how many years will the accumulated amount in Joshua's account be more than the accumulated amount in Zaira's account?
5. Amarpreet invested \($12~450\) in a \(7\)-year GIC that earned \(3.2\%\) simple interest annually. Two years later, her friend Swetha invested some money in a \(5\)-year GIC that earned \(3.8\%\) simple interest annually. The friends were surprised that, at the end of the terms, the two accumulated amounts were equal. How much did Swetha originally invest?
6. Which of the following changes to a simple interest investment yields a higher amount of interest: doubling the principal; doubling the interest rate; or doubling the time? Explain your answer.
7. Gerald invested some money in an account earning annual simple interest. At the beginning of the second year he had \($2625\) and at the beginning of the fourth year he had \($2875\). If he does not make any deposits or withdrawals and the interest rate remains the same, how much money will be in the account at the beginning of the \(20\)^th year?
8. Percy has \($4500\) that he would like to invest for \(6\) years. He has two options.
   • Option 1: A \(6\)-year GIC with an annual simple interest rate of \(4.5\%\).
   • Option 2: A \(2\)-year GIC with an annual simple interest rate of \(4.2\%\). After each \(2\)-year term is finished, Percy reinvests the principal plus the interest for another \(2\)-year term at the same interest rate.

   Which option would give Percy the most money at the end of the \(6\) years?