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 interest earned on a simple interest investment where 1.75%
interest is paid weekly for 5 years on $260.
A. | $18.20 | B. | $20.80 | C. | $22.75 | D. | $15.60 |
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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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Which line of the table shows the correct values for i and n?
Compound Interest Rate per Annum
(%) |
Compounding Frequency
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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 |
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4.
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Determine the regular weekly payment required to have $2000 at the end of 1.5
years if the investment earns 2.25% interest, compounded weekly.
A. | $25.22 | B. | $22.52 | C. | $28.10 | D. | $20.64 |
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5.
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For 3 years, regular weekly payments of $50 are deposited into an account that
compounds interest weekly. If the final value of the account is $8600, what was the interest
rate?
A. | 6.51% | B. | 6.43% | C. | 6.23% | D. | 6.45% |
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6.
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This portfolio was started 3 years ago. What is the current value of the
portfolio?
• A $1200 GIC that earns 2.65%, compounded quarterly
• Monthly deposits
of $250 into an account earning 1.75%, compounded monthly
A. | $10 532.48 | B. | $10 780.55 | C. | $11
021.88 | D. | $11 235.58 |
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7.
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This portfolio was started 4 years ago. What is the current value of the
portfolio?
• A $4000 bond earning 2.9%, compounded semi-annually
• Quarterly
deposits of $650 into an account earning 3.25%, compounded quarterly
A. | $15 410.17 | B. | $15 546.67 | C. | $15
661.37 | D. | $15 868.07 |
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8.
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This portfolio was started 8 years ago. What is the current value of the
portfolio?
• A $4000 bond earning 2.9%, compounded semi-annually
• Quarterly
deposits of $650 into an account earning 3.25%, compounded quarterly
A. | $28 681.54 | B. | $29 112.53 | C. | $29
575.30 | D. | $29 719.54 |
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9.
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Anya wants to renonvate her house. To pay for the renovation, she took out a
loan of $30 000 with an interest rate of 2.9%, compounded semi-annually. The loan must be repaid
in 15 compounding periods. How much interest will Anya pay?
A. | $16 204.34 | B. | $6525.00 | C. | $13
050.00 | D. | $7230.77 |
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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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A bank is offering a simple interest rate of 4.5% for a guaranteed investment
certificate with a 5-year term. What principal would you need to invest if you wanted to have $4000
at the end of the term?
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2.
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Estimate how long it would take for $50 to grow to $200 at each interest rate,
compounded monthly.
a) 7%
b) 14%
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3.
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Rodrigo estimates that he will need $6500 for a vacation he is planning for 18
months from now. How much money should he invest now, at 4.8% compounded quarterly, to meet his
goal?
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4.
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Benjamin wants to buy a new clarinet in 3 years, when he turns 24. He deposits
$30 every month in a savings account that earns 2.6%, compounded monthly. How much interest will he
have earned after the first year?
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5.
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Victoria and Colin both want to become debt free by paying off their credit card
debts at the same time. Victoria has $2033.93 on her credit card that charges an interest rate of
15.5%, compounded daily. She wants to pay off her debt by making regular monthly payments of $170.
Colin has $2721.34 on his credit card and he wants to pay off her debt by making regular monthly
payments of $225. What annual interest rate is Colin being charged if his debt compounds
daily?
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