Multiple Choice
Identify the choice that best
completes the statement or answers the question.
|
|
|
1.
|
Determine the interest earned on a simple interest investment where 2.3%
interest is paid daily for 1 year on $500.
A. | $230 | B. | $1150 | C. | $23 | D. | $11.50 |
|
|
|
2.
|
How many compounding periods are there for $850 invested for 10 years at 4.75%
compounded quarterly?
|
|
|
3.
|
Which line of the table shows the correct values for i and n?
Compound Interest Rate per Annum
(%) |
Compounding Frequency
|
Term
| Interest Rate per Compounding Period,
i (%) | Number of Compounding Periods, n | 5.4 | annually | 3 years | 0.54 | 3 | 3.0 | semi-annually | 18 months | 0.015 | 3 | 2.4 | monthly | 2 years | 0.001 | 24 | 3.65 | daily | 2 years | 0.001 | 730 | | | | | |
A. | Line 1 | B. | Line 2 | C. | Line
3 | D. | Line 4 |
|
|
|
4.
|
Determine the interest earned on a 4-year investment with an interest rate of
2.85%, compounded semi-annually, if the future value is $5039.33.
A. | $139.33 | B. | $439.33 | C. | $539.33 | D. | $5039.33 |
|
|
|
5.
|
Determine the interest earned on a 10-year investment with an interest rate of
5.4%, compounded annually, if the future value is $80 000.
A. | $32 719.30 | B. | $33 310.31 | C. | $33
605.82 | D. | $32 837.50 |
|
|
|
6.
|
A 15-year investment has an interest rate of 3.75%, compounded monthly, and a
future value of $95 000. Determine the ratio of future value to present value.
|
|
|
7.
|
Carmen must now pay $9000 to pay off her bank loan, which she borrowed 10 years
ago. The loan was compounded monthly at an interest rate of 5.2%. How much did Carmen originally
borrow?
A. | $15 121.25 | B. | $5421.07 | C. | $5356.70 | D. | $5921.05 |
|
|
|
8.
|
Carlos was approved for a mortgage to finance his new house that he purchased
for $325 000. He made a down payment that was 20% of the purchase price. The mortgage is
compounded semi-annually at an interest rate of 4.2%. Carlos will repay the mortgage in 25 with
regular monthly payments. How much interest will he have to pay?
A. | $93 796.24 | B. | $198 495.30 | C. | $158
796.24 | D. | $160 375.01 |
|
|
|
9.
|
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.
If Catherine wants to pay off her debt as quick as possible, how many
months will it take?
|
|
|
10.
|
Natasha needs special equipment for her job as a builder. She has two options.
She can buy the equipment which costs $12 800. Natasha will finance this purchase through the vendor
by making regular monthly payments over 6 years at an interest rate of 7.3%, compounded monthly. At
the end of the 6 years, the equipment will be worthless. She can also lease the equipment at a cost
of $185 per month. Both options require a down payment of $1980. What is the total cost of the
cheaper option?
A. | $13 320.00 | B. | $15 374.37 | C. | $13
394.37 | D. | $15 300.00 |
|
Short Answer
|
|
|
1.
|
Melodie has $3280 to invest. She wants her principal to grow to $4000 in 6 years
to help with a down payment on a condo. What simple interest rate will allow her to meet her
goal?
|
|
|
2.
|
A graduating class invested $6000 in a charitable trust fund so that their
school can offer scholarships. The interest rate is 6.45%, compounded daily. How much interest is
available from the trust fund for scholarships after 2 years?
|
|
|
3.
|
What interest rate, compounded annually, is required to make annual payments of
$5500 grow to $1 500 000 in 50 years?
|
|
|
4.
|
Rebecca saved $1000 from her summer job and bought a CSB earning 3.75%,
compounded monthly. She started an after school job in September and wants to have $2000 by next
summer so she can go travelling. How much does she need to save from her pay every month for 10
months if she can deposit the money in an account earning 2%, compounded monthly?
|
|
|
5.
|
Courtney has a debt of $852.31 and she is being charged an interest rate of
5.3%, compounded monthly. Courtney wants to pay off this debt by making only the minimum monthly
payments which are $10 or 4% of the balance, whichever is greater. How long will it take Courtney to
pay off her debt?
|