Multiple Choice
Identify the choice that best
completes the statement or answers the question.
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1.
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Determine the future value of a simple interest investment where 5% interest
paid monthly for 1.5 years on $1000.
A. | $1000 | B. | $1050 | C. | $1075 | D. | $1100 |
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2.
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Which investment will earn the most interest?
A. $500 invested for 8
years at a compound interest rate of 3.5%
B. $800 invested for 3 years at a simple interest
rate of 5%
C. $1000 invested for 4 years at a compound interest rate of 1.75%
D.
$500 invested for 8 years at a simple interest rate of 3.6%
A. | Option A | B. | Option B | C. | Option
C | D. | Option D |
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3.
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How many compounding periods are there for $1000 invested for December and
January at 1.8% compounded daily?
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4.
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Determine the future value and the total interest earned for the
investment.
Principal (P) ($)
| Compound
Interest Rate per Annum (%) |
Compounding Frequency
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Term
| 16 000 | 5.4 | monthly | 4.5 years | | | | |
A. | $20 389.98; $4389.98 | B. | $19 848.02; $3848.02 | C. | $20 398.53;
$4398.53 | D. | $20 956.50; $4956.50 |
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5.
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Determine the future value of annual payments of $5000 into an account that pays
3.95% interest, compounded annually, for 40 years.
A. | $469 563.75 | B. | $507 128.85 | C. | $493
041.94 | D. | $483 650.66 |
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6.
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Kristina took out a bank loan for $60 000 that must be repaid with regular
monthly payments of $1100. The bank charges her an interest rate of 3.0%, compounded monthly. How
many payments will Kristina have to make to pay off the bank loan?
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7.
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Catherine wants to travel to England. The trip costs $3000 and she can afford
monthly payments of $150. She can finance her trip using one of her two credit cards.
• Card
1 charges 12.7%, compounded daily.
• Card 2 charges 18.1%, compounded daily, but she gets 3%
cash back on all purchases.
What is the least amount of interest Catherine can pay?
A. | $473.75 | B. | $300.00 | C. | $391.02 | D. | $563.75 |
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8.
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Cormac wants to pay off all his debts in 4 years. He has two credit cards on
which he makes monthly payments:
• Card A has a balance of $3002.91 and an interest rate of
17.6%, compounded daily.
• Card B has a balance of $4712.01 and an interest rate of 15.9%,
compounded daily.
Cormac wants to consolidate his debts into a line of credit with an interest
rate of 8.9%, compounded monthly. If Cormac consolidates his debt, what will his monthly payments
be?
A. | $117.11 | B. | $191.74 | C. | $221.33 | D. | $74.63 |
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9.
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Vennie has purchased a statue from an artist in Italy. The statue costs $19 750
and the cost to safely ship the statue is $975. He wants the pay off the debt in 4 years with regular
monthly payments. He has two options to finance the purchase.
• Finance the cost through the
artist at an interest rate of 20%, compounded monthly, with the incentive that the artist will pay
the shipping cost.
• Finance the cost through the bank at an interest rate of 15.7%,
compounded monthly.
What is the least amount of interest he can pay?
A. | $8290.30 | B. | $7315.30 | C. | $6971.15 | D. | $9097.98 |
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10.
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Jasmine needs a car. She has two different options. She can rent a car for $225
per month for three years. She can also buy a new car for $21 000. She will finance the purchase
through the dealership by making regular monthly payments over 9 years at an interest rate of 4.9%,
compounded monthly. If she purchases the car, she will sell it after three years at market value. The
car depreciates at a rate of 25%. In both options, she must make a down payment of $1200. What is the
total cost of the cheaper option?
A. | $9300.00 | B. | $14 657.02 | C. | $9375.17 | D. | $8100.00 |
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Short Answer
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1.
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Arrange the investments in the order of least to greatest return and give the
return.
A. $900 invested for 2 years at a simple interest rate of 5.3%
B. $450
invested for 7 years at a compound interest rate of 3.75%
C. $600 invested for 3 years at a
simple interest rate of 7.5%
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2.
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Jody must now pay $30 000 to pay off her bank loan, which she borrowed 8 years
ago. The loan was compounded quarterly at an interest rate of 6.1%. How much did Jody originally
borrow?
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3.
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Arianna needs to buy supplies for her business. The supplies cost $3900 and she
intends to pay for the cost by using a credit card and by making regular monthly payments of $225.
She has two different credit cards:
• Card A charges 15.7%, compounded daily, but Arianna
gets 2% off of all purchases.
• Card B charges 13.4%, compounded daily.
What is the least
amount of interest that she can pay?
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4.
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Annie is buying textbooks for school which cost $1250. She wants to pay for them
with credit. She has two different credit cards to choose from:
• Card A charges 14.5%,
compounded daily, and Annie must pay an annual fee of $50 added to the first month’s
balance.
• Card B chages 17.0%, compounded daily, and Annie gets 3% off of all
purchases.
If Annie does not buy anything else on credit for the year and if she wants pays off
her debt by making regular monthly payments of $200, what is the least amount of interest Annie can
pay?
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5.
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Fredo purchased a new computer that costs $1200. He wants to pay off the debt in
6 months and has two options:
• Use his line of credit, compounded monthly, which is 2.4%
above the Bank of Canada rate, which is 1%.
• Finance the purchase through the vendor at a
rate of 3.6%, compounded monthly.
If after 3 months, the Bank of Canada rate increases to 2.5%,
what is the total cost for Fredo if he uses his line of credit?
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