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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Determine the interest earned on a simple interest investment with a 15-year
term at 5.7% on a deposit of $25 000.
A. | $21 250 | B. | $22 500 | C. | $22
125 | D. | $21 375 |
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3.
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Determine the term of a $1000 investment with an interest rate of 1.6%,
compounded daily, if the future value is $1100.
A. | 5.96 years | B. | 6.00 years | C. | 6.04
years | D. | 5.92 years |
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4.
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Determine the term of a $39 000 investment with an interest rate of 2.06%,
compounded quarterly, if the future value is $52 000.
A. | 14 years | B. | 15 years | C. | 16
years | D. | 17 years |
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5.
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Determine the future value of weekly payments of $30 into an account that pays
1.75% interest, compounded weekly, for 1 year.
A. | $1570.98 | B. | $1568.20 | C. | $1573.46 | D. | $1572.33 |
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6.
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Determine the future value of quarterly payments of $1000 into an account that
pays 5.1% interest, compounded quarterly, for 19 years.
A. | $126 997.25 | B. | $133 347.11 | C. | $122
552.35 | D. | $123 822.32 |
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7.
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This portfolio was started 20 years ago. What is the current value of the
portfolio?
• Semi-annual deposits of $3000 into an account averaging 3.4%, compounded
semi-annually
• A $25 000 bond earning 7.8%, compounded monthly
A. | $288 247.10 | B. | $247 841.90 | C. | $251
336.57 | D. | $269 174.83 |
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8.
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This portfolio was started 6 years ago. What is the portfolio’s current
rate of return?
• Monthly deposits of $180 into an account earning 3.25%, compounded
monthly
• A 6-year $1600 investment averaging 6.2%, compounded annually
A. | 13.90% | B. | 13.50% | C. | 14.25% | D. | 14.12% |
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9.
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Gila took out a loan from the bank to buy a new car that costs $22 500. The bank
offered her a simple interest rate of 4.3%. The loan is to be repaid in 5 years. What amount did Gila
need to pay back?
A. | $27 771.80 | B. | $27 337.50 | C. | $23
467.50 | D. | $22 500.00 |
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10.
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Soloman bought a used car for $12 000 during a sale. The sale was that as long
as the debt was paid off in three years, no interest would be charged. Otherwise, a penalty equal to
an interest rate of 10.5%, compounded monthly, would be charged, starting from when he first borrowed
the money. If Soloman were to make regular monthly payments, how much would each payment need to be
so that he pays off the debt in time?
A. | $390.03 | B. | $456.13 | C. | $533.71 | D. | $333.33 |
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Short Answer
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1.
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Trahn wants to buy a new sound system but he has only $1000, half the amount he
needs. When can Trahn buy the sound system if he invests his money at 3.7%, compounded quarterly, to
the nearest year?
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2.
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Louise is planning to renovate her house. She intends to spend no more than $30
000. She has $20 000 to invest in an account that pay 4.28% compounded monthly. How long will it take
Louise to meet her goal?
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3.
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Paige took out a $12 000 loan from the bank to pay for equipment for her
business. The bank offered her an interest rate of 7.0%, compounded semi-annually. The loan is to be
repaid in 4 years. What amount did Paige need to pay back?
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Problem
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1.
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Solomon bought a $65 000 corporate bond. The bond earns 4.2%, compounded
monthly. After 3 years, the interest rate changed to 5.2%, compounded semi-annually. Determine the
value of Solomon’s investment after 8 years. Show your work.
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2.
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For 5 years, Bronwyn deposited $100 every month into an investment that earned
2.5%, compounded monthly. Over the same 5 years, Sam deposited $1000 annually into an investment that
earned 3%, compounded annually. Whose investment is worth more, and by how much? Show your
work.
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3.
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Otto purchased food ingredients from Europe for his restaurant. The ingredients
cost $3100 and shipping costs $400. He wants to pay the costs by making regular monthly payments for
2 years and he has two options to pay for the purchases:
• Finance the purchase through the
vendor at 16.8%, compounded daily. As an incentive, the vendor will pay for the shipping
cost.
• Use his line of credit which charges an interest rate of 12.2%, compounded
daily.
a) Which option costs less overall? Show your work.
b) Which option
charges less interest? Show your work.
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