Multiple Choice
Identify the choice that best
completes the statement or answers the question.
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1.
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Devon invested $270 at 1.95% simple interest. At the investment’s
maturity, its value was $364.77. How long was the money invested?
A. | 11 years | B. | 14 years | C. | 18
years | D. | 17 years |
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2.
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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 |
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3.
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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.
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4.
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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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5.
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This portfolio was started 12 years ago. What is the portfolio’s current
rate of return?
• A 12-year $8000 GIC that earns 3.65%, compounded quarterly
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Monthly deposits of $325 into an account earning 2.75%, compounded monthly
A. | 31.94% | B. | 39.21% | C. | 25.92% | D. | 23.62% |
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6.
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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 interest did the loan
accumulate?
A. | $3643.30 | B. | $3578.93 | C. | $4680.00 | D. | $6121.25 |
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7.
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Garrick is purchasing equipment for his job as a builder. The equipment costs
$1000 and he wants to make monthly payments of $125. He has two different credit cards that he can
use to finance the purchase.
• Card A charges 9.9%, compounded daily, but it also charges a
fee of $65 for all purchases over $1000 that is immediately added to the balance.
• Card B
charges 13.3%, compounded daily.
What is the least amount of interest Garrick can pay?
A. | $125.00 | B. | $109.01 | C. | $44.01 | D. | $53.24 |
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8.
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Kareem is purchasing a new television that costs $2250. He has two different
options to finance the purchase and he wants to pay off the debt in a year by making regular monthly
payments.
Option A: Finance the purchase through the store at an interest rate of 12.1%,
compounded daily, with a $125 rebate.
Option B: Finance the purchase with a line of credit at an
interest rate of 10.2%, compounded daily.
What is the least amount of interest Kareem can
pay?
A. | $17.54 | B. | $126.77 | C. | $226.77 | D. | $142.54 |
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9.
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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 does not consolidate his debt, what will his combined
monthly payments be?
A. | $87.78 | B. | $191.62 | C. | $221.33 | D. | $133.55 |
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10.
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Johanna needs a place to live. She can either rent an apartment or buy a new
house. Renting costs $300 per week. She can finance the purchase of a house that costs $280 000 with
a mortage. She has negotiated with the bank a mortgage of 87% of the purchase price at an interest
rate of 3.9%, compounded semi-annually. The term of the mortgage is 15 years and it requires regular
monthly payments. The house depreciates at a rate of 4%. If she purchases the house, what will her
regular monthly payments be?
A. | $1200.00 | B. | $2052.75 | C. | $3796.61 | D. | $1785.89 |
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Short Answer
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1.
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How many compounding periods are there for $75 invested for 10 years at 5.2%
compounded annually?
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2.
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Ramona has created the following investment portfolio:
• At the end of
each year, for the past 5 years, she has purchased a 5-year $2000 CSB, with an average annual
interest rate of 3.25%, compounded annually.
• She has a $8000 GIC, with a 20-year term,
that she purchased 20 years ago and earned 5.95%, compounded monthly.
What is the current value of
her portfolio?
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3.
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Saul took out a loan from the bank to buy a new car that costs $17 600. The bank
offered him a simple interest rate of 2.9%. The loan is to be repaid in 7 years. What amount did Saul
need to pay back?
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4.
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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.
What is the total cost of the cheaper option?
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5.
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A company replaces its trucks after the trucks have been used for 12 years. The
company uses a depreciation rate of 25%. If after 5 years of use a truck is worth $19 000, what will
it be worth when the company replaces it?
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