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 3% interest
paid quarterly for 3 years on $700.
A. | $763.00 | B. | $728.00 | C. | $742.00 | D. | $805.00 |
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2.
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Principal of $1700 is invested at 8.2% simple interest, paid annually, for 7
years. What is the rate of return?
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3.
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Aster invested $790 for 5 years. At the investment’s maturity, its value
was $1090.20. What was the annual simple interest rate?
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4.
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Freda has $14 000 to invest for 10 years. Which investment option will earn her
more interest? How much more interest?
A. 2.5% simple interest, paid daily
B.
1.25% compound interest, paid annually
A. | Option A: $1648.21 | B. | Option B: $1335.96 | C. | Option A:
$1524.91 | D. | Option B: $1798.50 |
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5.
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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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6.
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Determine the future value of monthly payments of $200 into an account that pays
4.6% interest, compounded monthly, for 15 years.
A. | $56 879.79 | B. | $46 538.01 | C. | $64
636.13 | D. | $51 708.90 |
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7.
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Regular quarterly payments of $6000 are deposited into an account paying 3.19%
interest, compounded quarterly. If the final value of the account is $75 000, how long was the money
invested?
A. | 3.12 years | B. | 2.99 years | C. | 2.85
years | D. | 3.27 years |
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8.
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This portfolio was started 10 years ago. What is the current value of the
portfolio?
• Quarterly deposits of $650 into an account earning 3.25%, compounded
quarterly
• A $15 000 investment averaging 4.5%, compounded annually
A. | $54 463.50 | B. | $53 871.69 | C. | $55
492.65 | D. | $54 129.57 |
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9.
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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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10.
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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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Short Answer
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1.
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Naveen deposited $600 into a savings account that earns 3.5% simple interest,
paid daily. On the same day, her sister Lily deposited $700 into a savings account that earns 3%
simple interest, paid daily. Who will have more money after 6 months? How much more?
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2.
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Bella has created the following investment portfolio:
• Every month,
for the past 7.5 years, she has put $100 from her paycheque into a savings account, earning 1.75%,
compounded monthly.
• She has a $6000 GIC, with a 10-year term, that she purchased 10 years
ago and earned 6.2%, compounded annually.
What is the current value of her portfolio?
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3.
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Jose needs a truck for his job. He can lease a truck for 4 years for $500 per
month and a down payment of $5600. He can purchase a new truck for $41 000 which would be financed
with a bank loan at an interest rate of 4.4%, compounded monthly, and a down payment of $6100. He
would pay off this loan with regular monthly payments over 4 years. He can also rent a truck at $85
per day. What is the total cost of buying the truck?
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Problem
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1.
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Stefan invested in a GIC with increasing interest, compounded annually, for 3
years. After the first year, the interest rate increases by 2%. The growth of the investment is shown
in the table below. What is the annual rate of interest each year? What was the principal that Stefan
invested? Show your work. End of Year | Value of Investment ($) | 1 | 1221.60 | 2 | 1268.02 | 3 | 1316.21 | | |
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2.
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Anton and Julian started investing at the same time. Anton makes payments of $20
at the end of each week into an investment that earns 6.25%, compounded weekly. Julian made a single
payment into an investment that earns 6.25%, compounded annually.
a) At the end of 3 years,
what is the future value of Anton’s investment?
b) Julian’s investment has the
same future value as Anton’s in 3 years. How much principal did Julian invest?
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3.
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Carla needs to borrow $6500 to pay for school. She has two options:
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Borrow the money from the bank at an interest rate of 3.9%, compounded monthly, with monthly payments
of $400.
• Borrow the money from her parents at an interest rate of 3.5%, compounded
monthly, with monthly payments of $250.
a) How long would it take Carla to pay off both
loans? Show your work.
b) What is the total amount Carla would pay on both loans? Show your
work.
c) Which option would you recommend Carla do? Explain.
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