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 with a 6-year term on
a principal of $150 at 2.8%.
A. | $180.50 | B. | $175.20 | C. | $402.00 | D. | $154.30 |
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2.
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Determine the future value of a simple interest investment with a 4-year term on
a principal of $400 at 1.9%.
A. | $407.60 | B. | $460.80 | C. | $404.00 | D. | $430.40 |
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3.
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Principal of $1750 is invested at 2% simple interest, paid semi-annually, for
1.5 years. What is the rate of return?
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4.
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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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5.
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A 10-year bond has an interest rate of 5.5%, compounded annually, and a future
value of $1000. Determine the ratio of future value to present value.
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6.
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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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7.
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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 did Carmen originally
borrow?
A. | $15 121.25 | B. | $5421.07 | C. | $5356.70 | D. | $5921.05 |
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8.
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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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9.
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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.
If Catherine wants to pay off her debt as quick as possible, how many
months will it take?
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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 moves out after 6 years, what will be
the market value of the house when she moves out?
A. | $219 172.18 | B. | $121 415.34 | C. | $190
679.80 | D. | $1146.88 |
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Short Answer
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1.
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How long will it take for quarterly payments of $900 to grow to more than $1 000
000 if the interest rate is 5.29%, compounded quarterly?
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2.
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Vernon wants to buy a car that costs $24 000 and he has a two different options
to finance the purchase.
Option A: Finance the purchase through the dealership by making regular
quarterly payments for 9 years at an interest rate of 2.5%, compounded daily.
Option B: Finance
the purchase with a bank loan by making regular monthly payments for 9 years at an interest rate of
2.5%, compounded daily.
What is the total cost of the cheaper option?
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3.
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Damon is purchasing a new computer that costs $1800. He has two different
options to finance the purchase and he wants to pay off the debt in two years by making regular
monthly payments.
Option A: Finance the purchase through the store at an interest rate of 13.2%,
compounded daily, with an immediate $75 rebate.
Option B: Finance the purchase with a line of
credit at an interest rate of 12.4%, compounded daily.
What is the least amount of interest Damon
can pay?
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Problem
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1.
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A bank is offering a simple interest rate of 2.25% for a guaranteed investment
certificate with a 3-year term.
a) What principal would you need to invest if you wanted to
have $8000 at the end of the term? Show your work.
b) How long will it take for the value
of the GIC to be $16 000? Show your work.
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2.
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Victor opened this portfolio 12 years ago, when he turned 40.
• A $15
000 GIC that earns 6.65%, compounded quarterly
• Monthly deposits of $250 into an account
earning 2.75%, compounded monthly
a) What will be the portfolio’s value when Victor
turns 47? Show your work.
b) What will be the portfolio’s rate of return? Show your
work.
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3.
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Kalpna opened this portfolio 4 years ago.
• A $8500 fund that earns
5.45%, compounded annually
• Monthly deposits of $200 into an account earning 3%, compounded
monthly
a) What will be the portfolio’s value in 30 years when Kalpna is ready to
retire?
b) What will be the portfolio’s rate of return?
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