Multiple Choice
Identify the choice that best
completes the statement or answers the question.
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1.
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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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2.
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Claude has been approved for a $12 400 loan to pay for a new boat. The terms of
the loan state that it must be repaid in 4 years at a simple interest rate of 9.6%. How much interest
must Claude pay on this loan?
A. | $17 892.21 | B. | $4761.60 | C. | $5492.21 | D. | $17 161.60 |
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3.
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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 will each monthly payment be?
A. | $1744.98 | B. | $1395.99 | C. | $1401.25 | D. | $1751.56 |
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4.
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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 |
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5.
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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
much interest will Kristina pay?
A. | $4900.00 | B. | $9473.68 | C. | $3800.00 | D. | $4586.13 |
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6.
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Dante wants to buy a truck that costs $35 000 and he has a two different options
to finance the purchase.
Option A: Finance the purchase through the dealership by making regular
weekly payments for 4 years at an interest rate of 5.0%, compounded daily.
Option B: Finance the
purchase with a bank loan by making regular monthly payments for 4 years at an interest rate of 5.0%,
compounded daily.
What is the total cost of the cheaper option?
A. | $42 744.99 | B. | $38 634.90 | C. | $42
731.34 | D. | $38 696.89 |
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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 total cost of the cheaper option?
A. | $3473.75 | B. | $3450.00 | C. | $3391.02 | D. | $2910.00 |
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8.
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Yu needs a car. He can lease a car for 3 years for $300 per month and a down
payment of $4100. He can purchase a new car for $28 000, which would be financed with a bank loan at
an interest rate of 5.2%, compounded monthly, and a down payment of $3700. He would pay off this loan
with regular monthly payments. He can also rent a car at $75 per day. What is the total cost of
renting the car for 3 years?
A. | $27 375 | B. | $86 225 | C. | $54
750 | D. | $82 125 |
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9.
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Nigel is purchasing a house for $225 000 that appreciates at a rate of about 3%
per year. He will finance this purchase with a 20-year mortgage at an interest rate of 4.5%,
compounded semi-annually, with monthly payments, where he is required to make a 15% down payment. How
much is the down payment?
A. | $191 250 | B. | $10 125 | C. | $33
750 | D. | $225 000 |
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10.
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Nigel is purchasing a house for $225 000 that appreciates at a rate of about 3%
per year. He will finance this purchase with a 20-year mortgage at an interest rate of 4.5%,
compounded semi-annually, with monthly payments, where he is required to make a 15% down payment. How
much does he pay monthly?
A. | $1418.41 | B. | $1058.89 | C. | $1205.65 | D. | $922.46 |
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Short Answer
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1.
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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 interest must Jody
pay?
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2.
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Emily is purchasing a house for $185 000 that appreciates at a rate of about
1.5% per year. She will finance this purchase with a 15-year mortgage at an interest rate of 3.9%,
compounded semi-annually, with monthly payments, where she is required to make a 10% down payment. If
she sells the house after 5 years, what is her total cost of buying the house?
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3.
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Camille needs equipment for her job as an electrician. She has two options. She
can either buy new equipment that costs $7100. She will finance this cost through the vendor by
making regular monthly payments over 3 years at an interest rate of 7.1%, compounded monthly. At the
end of 3 years, the equipment is worthless. She can also rent the equipment at a cost of $20 per day.
She only needs the equipment 5 days a week. What is the total cost to buy the equipment?
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Problem
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1.
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Bella borrowed $12 700 at 7.2%, compounded quarterly, to purchase equipment for
her business. The loan is to be repaid in 4 years.
a) What amount will Bella have to pay
back? Show your work.
b) How much interest will Bella have to pay? Show your work.
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2.
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Jessica and Amir want to become debt-free at the same time. Jessica has a
balance of $3812.55 on her credit card, which charges an interest rate of 13.2%, compounded daily,
and she makes regular monthly payments of $200. Amir has a balance of $2921.04 on his credit card and
he makes regular monthly payments of $150. If they both become debt-free at the exact same time, what
annual interest rate, compounded daily, does Amir’s credit card charge? Show your work.
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