Deck 10: Simple Interest

Question 1

The interest is the amount of money borrowed.

Answer 1

False

Question 2

Interest is the cost of borrowing.

Answer 2

True

Question 3

In the U.S. Rule, the partial payment first covers the interest and the remainder reduces the principal.

Answer 3

True

Question 4

Rate is equal to interest divided by the principal times time.

Question 5

Simple Interest = principal × rate.

Question 6

The federal government likes to use ordinary interest.

Question 7

The exact interest method represents time as the exact number of days divided by 365.

Question 8

July 10 to March 15, given no leap year, is 119 days.

Question 9

18 months is the same as 1.5 years.

Question 10

In the U.S. Rule, the first step is to calculate interest on the total life of the loan.

Question 11

To convert time in days, it is necessary to multiply the time in years times 360 or 365.

Question 12

Ordinary interest results in a slightly higher rate of interest than exact interest.

Question 13

The amount a bank charges for the use of money is called interest.

Question 14

Ordinary interest is never used by banks.

Question 15

Ordinary interest is required by all banks.

Question 16

The U.S. Rule is seldom used in today's workplace.

Question 17

The U.S. Rule is a method that allows the borrower to receive proper interest credit when a debt is paid off in more than one payment before the maturity date.

Question 18

The Banker's Rule is the same as the exact interest method.

Question 19

Principal is equal to rate divided by interest times time.

Question 20

The time of a loan could be expressed in months, years, or days.

Question 21

The amount charged for the use of a bank's money is called:

A)Principal
B)Interest
C)Rate
D)Time
E)None of these

Question 22

Interest on $5,255 at 12% for 30 days (use ordinary interest)is:

A)$52.55
B)$55.25
C)$5.26
D)$5.25
E)None of these

Question 23

At maturity, using the U.S. Rule, the interest calculated from the last partial payment is:

A)Subtracted from adjusted balance
B)Added to beginning balance
C)Subtracted from beginning balance
D)Added to adjusted balance
E)None of these

Question 24

Interest is equal to:

A)Principal × rate divided by time
B)Principal divided by rate × time
C)Principal × time
D)Principal × rate × time
E)None of these

Question 25

A $40,000 loan at 4% dated June 10 is due to be paid on October 11. The amount of interest is (assume ordinary interest):

A)$503.00
B)$2,500.00
C)$546.67
D)$105.33
E)None of these

Question 26

The number of days between Aug. 9 and Jan. 3 is:

A)145
B)144
C)147
D)148
E)None of these

Question 27

A note dated Dec. 13 and due July 5 (assume no leap year)runs for exactly:

A)11 days
B)161 days
C)204 days
D)347 days
E)None of these

Question 28

Matty Kaminsky owns a new Volvo. His June monthly interest is $400. The rate is 8 ½%. Matty's principal balance at the beginning of June is (use 360 days):

A)$65,740.58
B)$64,470.58
C)$65,704.58
D)$56,470.59
E)None of these

Question 29

Janet Home went to Citizen Bank. She borrowed $7,000 at a rate of 8%. The date of the loan was September 20. Janet hoped to repay the loan on January 20. Assuming the loan is based on ordinary interest, Janet will pay back how much interest on January 20?

A)$188.22
B)$187.18
C)$189.78
D)$187.17
E)None of these

Question 30

Federal Reserve banks as well as the federal government like to calculate simple interest based on:

A)Exact interest, ordinary interest
B)Using 30 days in each month
C)Using 31 days in each month
D)Exact interest
E)None of these

Question 31

Joan Roe borrowed $85,000 at a rate of 11 3/4%. The date of the loan was July 8. Joan is to repay the loan on Sept. 14. Assuming the loan is based on exact interest, the interest Joan will pay on Sept. 14 is:

A)$86,860.68
B)$1,860.68
C)$1,886.53
D)$86,886.53
E)None of these

Question 32

In calculating interest in the U.S. Rule from the last partial payment, the interest is subtracted from the adjusted balance.

Question 33

The U.S. Rule:

A)Is used only by banks
B)Is never used by banks
C)Allows borrowers to receive interest credit
D)Is hardly used today
E)None of these

Question 34

Jill Ley took out a loan for $60,000 to pay for her child's education. The loan would be repaid at the end of eight years in one payment with interest of 6%. The total amount Jill has to pay back at the end of the loan is:

A)$88,008
B)$80,800
C)$88,800
D)$28,800
E)None of these

Question 35

Joe Flynn visits his local bank to see how long it will take for $1,200 to amount to $2,100 at a simple interest rate of 7%. The time is (round time in years to nearest tenth):

A)9.2 years
B)11.1 years
C)10.7 years
D)17.1 years
E)None of these

Question 36

Which of the following is not true of the U.S. Rule?

A)Calculate interest on principal from date of loan to date of first payment
B)Allows borrower to receive proper interest credits
C)Can use 360 days in its calculations
D)Can involve more than one payment before maturity date
E)None of these

Question 37

A note dated August 18 and due on March 9, given no leap year, runs for exactly:

A)230 days
B)227 days
C)272 days
D)203 days
E)None of these

Question 38

Given interest of $11,900 at 6% for 50 days (ordinary interest), one can calculate the principal as:

A)$1,428,005.70
B)$4,128,005.70
C)$1,428,000.00
D)$1,420.70
E)None of these

Question 39

Simple interest usually represents a loan of:

A)One month or less
B)One year or less
C)Two years or less
D)Six months or less
E)None of these

Question 40

Interest of $1,632 with principal of $16,000 for 306 days (ordinary interest)results in a rate of:

A)10%
B)12%
C)12 1/2%
D)13%
E)None of these

Question 41

Janet took out a loan of $50,000 from Bank of America at 8% on March 19, 2015, which is due on July 8, 2016. Using exact interest, the amount of Janet's interest cost is:

A)$5,018.44
B)$2,561.44
C)$5,261.44
D)$5,216.44
E)None of these

Question 42

On May 17, Jane took out a loan for $33,000 at 6% to open her law practice office. The loan will mature the following year on January 16. Using the ordinary interest method, what is the maturity value due on January 16?

A)$34,342
B)$34,320
C)$34,323.62
D)$34,254
E)None of these

Question 43

Match the following terms with their definitions.

-Ordinary interest

A)360 days
B)Principal times rate times time
C)Cost of borrowing
D)365 days
E)Result of applying the U.S. rule
F)Maturity value
G)Partial payment must be applied to interest first
H)Amount due on due date
I)Amount of money borrowed
J)Consumer groups against it

Question 44

Match the following terms with their definitions.

-Banker's rule

A)360 days
B)Principal times rate times time
C)Cost of borrowing
D)365 days
E)Result of applying the U.S. rule
F)Maturity value
G)Partial payment must be applied to interest first
H)Amount due on due date
I)Amount of money borrowed
J)Consumer groups against it

Question 45

The number of days between May 20 and November 22 is:

A)197
B)206
C)186
D)183
E)None of these

Question 46

Sandra Gloy borrowed $5,000 on a 120-day 5% note. Sandra paid $500 toward the note on day 40. On day 90 she paid an additional $500. Using the U.S. Rule, her adjusted balance after the first payment is:

A)$4,527.87
B)$4,725.87
C)$4,725.70
D)$4,527.78
E)None of these

Question 47

Match the following terms with their definitions.

-Exact interest

A)360 days
B)Principal times rate times time
C)Cost of borrowing
D)365 days
E)Result of applying the U.S. rule
F)Maturity value
G)Partial payment must be applied to interest first
H)Amount due on due date
I)Amount of money borrowed
J)Consumer groups against it

Question 48

Jim Murphy borrowed $30,000 on a 120-day 14% note. Jim paid $5,000 toward the note on day 95. On day 105 he paid an additional $6,000. Using the U.S. Rule, Jim's adjusted balance after the first payment is:

A)$25,000
B)$28,891.67
C)$1,108.33
D)$26,108.33
E)None of these

Question 49

Sue Gastineau borrowed $17,000 from Regions Bank at a rate of 5.5% to open her lingerie shop. The date of the loan was March 5. Sue hoped to repay the loan on September 19. Assuming the loan is based on ordinary interest, Sue will pay back how much in interest expense?

A)$467.50
B)$541.25
C)$514.25
D)$506.46
E)None of these

Question 50

Match the following terms with their definitions.

-Interest

A)360 days
B)Principal times rate times time
C)Cost of borrowing
D)365 days
E)Result of applying the U.S. rule
F)Maturity value
G)Partial payment must be applied to interest first
H)Amount due on due date
I)Amount of money borrowed
J)Consumer groups against it

Question 51

Match the following terms with their definitions.

-Maturity value

A)360 days
B)Principal times rate times time
C)Cost of borrowing
D)365 days
E)Result of applying the U.S. rule
F)Maturity value
G)Partial payment must be applied to interest first
H)Amount due on due date
I)Amount of money borrowed
J)Consumer groups against it

Question 52

Desiree Brown borrowed $50,000 on a 90-day 8% note. Desiree paid $3,000 toward the note on day 40. On day 60 she paid an additional $4,000. Using the U.S. Rule, Desiree's adjusted balance after the first payment is:

A)$1,008.89
B)$48,008.89
C)$47,444.44
D)$44,744.44
E)None of these

Question 53

Match the following terms with their definitions.

-U.S. Rule

A)360 days
B)Principal times rate times time
C)Cost of borrowing
D)365 days
E)Result of applying the U.S. rule
F)Maturity value
G)Partial payment must be applied to interest first
H)Amount due on due date
I)Amount of money borrowed
J)Consumer groups against it

Question 54

Match the following terms with their definitions.

-Principal

A)360 days
B)Principal times rate times time
C)Cost of borrowing
D)365 days
E)Result of applying the U.S. rule
F)Maturity value
G)Partial payment must be applied to interest first
H)Amount due on due date
I)Amount of money borrowed
J)Consumer groups against it

Question 55

Banks and other financial institutions sometimes calculate simple interest based on:

A)Using 350 days in the year
B)Using 31 days for each month
C)Using 366 days in the year
D)Banker's rule, ordinary interest
E)None of these

Question 56

With interest of $1,832.00 and a principal of $16,000 for 206 days, using the ordinary interest method, the rate is:

A)20%
B)12%
C)2%
D)10%
E)None of these

Question 57

Joyce took out a loan for $21,900 at 12% on March 18, 2018, which will be due on January 9, 2019. Using ordinary interest, Joyce will pay back on Jan. 9 a total amount of:

A)$2,167.10
B)$24,068.10
C)$24,038.40
D)$2,138.40
E)None of these

Question 58

Match the following terms with their definitions.

-Adjusted balance

A)360 days
B)Principal times rate times time
C)Cost of borrowing
D)365 days
E)Result of applying the U.S. rule
F)Maturity value
G)Partial payment must be applied to interest first
H)Amount due on due date
I)Amount of money borrowed
J)Consumer groups against it

Question 59

Match the following terms with their definitions.

-Principal and interest

A)360 days
B)Principal times rate times time
C)Cost of borrowing
D)365 days
E)Result of applying the U.S. rule
F)Maturity value
G)Partial payment must be applied to interest first
H)Amount due on due date
I)Amount of money borrowed
J)Consumer groups against it

Question 60

Match the following terms with their definitions.

-Simple interest formula

A)360 days
B)Principal times rate times time
C)Cost of borrowing
D)365 days
E)Result of applying the U.S. rule
F)Maturity value
G)Partial payment must be applied to interest first
H)Amount due on due date
I)Amount of money borrowed
J)Consumer groups against it

Question 61

Use ordinary interest:
$$\begin{array} { | l | l | l | l | l | l | l | } \hline & & \text { Date } & \text { Date } & & \text { Simple } & \text { Amount } \\\text { Principal } & \text { Interest Rate } & \text { Borrowed } & \text { Repaid } & \text { Time } & \text { Interest } & \text { Paid Back } \\\hline \$ 9,000 & 11 \% & \text { Apr } 20 & \text { Aug } 8 & \text { A } & \text { B } & \text { C } \\\hline\end{array}$$

Question 62

Find A and B in the table below.
$$\begin{array} { | l | l | l | l | l | } \hline \text { Principal } & \text { Interest Rate } & \text { Time } & \begin{array} { l } \text { Simple } \\\text { Interest }\end{array} & \begin{array} { l } \text { Total Amount } \\\text { Owed }\end{array} \\\hline \$ 16,000 & 8 \% & 3 \mathrm { mos } & \mathrm { A } & \mathrm { B } \\\hline\end{array}$$

Question 63

Find A and B in the table below.
$$\begin{array} { | l | l | l | l | l | } \hline \text { Principal } & \text { Interest Rate } & \text { Time } & \begin{array} { l } \text { Simple } \\\text { Interest }\end{array} & \begin{array} { l } \text { Total Amount } \\\text { Owed }\end{array} \\\hline \$ 25,000 & 10 \% & 2 \text { yrs } & \text { A } & \text { B } \\\hline\end{array}$$

Question 64

Jones of Boston borrowed $40,000, on a 90-day 10% note. After 60 days, Jones made an initial payment of $6,000. On day 80, Jones made an additional payment of $7,000. Assuming the U.S. Rule, what is the adjusted balance after the second payment? Use 360 days.

Question 65

Round to nearest cent or hundredth percent as needed:
$$\begin{array} { | l | l | l | l | } \hline \text { Principal } & \text { Rate } & \text { Time } & \text { Simple Interest } \\\hline ? & 11 \% & 2 \mathrm { mos } & \$ 1,250 \\\hline\end{array}$$

Question 66

Find A and B in the table below.
$$\begin{array} { | l | l | l | l | l | } \hline \text { Principal } & \text { Interest Rate } & \text { Time } & \begin{array} { l } \text { Simple } \\\text { Interest }\end{array} & \begin{array} { l } \text { Total Amount } \\\text { Owed }\end{array} \\\hline \$ 22,000 & 12 \% & 8 \mathrm { mos } & \mathrm { A } & \mathrm { B } \\\hline\end{array}$$

Question 67

Round to nearest cent:
$$\begin{array} { | l | l | l | l | l | } \hline \text { Principal } & \text { Interest Rate } & \text { Time } & \begin{array} { l } \text { Simple } \\\text { Interest }\end{array} & \begin{array} { l } \text { Total Amount } \\\text { Owed }\end{array} \\\hline \$ 32,000 & 7 \% & 3 \text { yrs } & \text { A } & \text { B } \\\hline\end{array}$$

Question 68

On May 19, Bette Santoro borrowed $3,000 from Resse Bank at a rate of 12½%. The loan is to be repaid on October 8. Assuming the loan is based on exact interest, what is the total interest cost to Bette?

Question 69

Amy Koy met Pat Quinn on Sept. 8 at Queen Bank. After talking with Pat, Amy decided she would like to consider a $9,000 loan at 10 1/2% to be repaid on Feb. 17 of the next year on exact interest. Calculate the amount that Amy would pay at maturity under this assumption. Round all answers to the nearest cent.

Question 70

Use ordinary interest:
$$\begin{array} { | l | l | l | l | l | l | l | } \hline & \text { Interest } & \text { Date } & \text { Date } & & \text { Simple } & \text { Amount Paid } \\\text { Principal } & \text { Rate } & \text { Borrowed } & \text { Repaid } & \text { Time } & \text { Interest } & \text { Back } \\\hline \$ 8,000 & 12 \% & \text { May 5 } & \text { Aug 10 } & \text { A } & \text { B } & \text { C } \\\hline\end{array}$$

Question 71

Find the adjusted balance (principal)using the U.S. Rule (360 day)after the first payment.
$$\begin{array} { | l | l | l | l | l | } \hline \text { Rate } & \text { Total Time for Note } & \text { Note Amount } & \begin{array} { l } \text { Partial Payment } \\\text { on Day 30 }\end{array} & \begin{array} { l } \text { Partial Payment } \\\text { on Day 90 }\end{array} \\\hline 11 \% & 120 \text { days } & \$ 7,000 & \$ 900 & \$ 1,200 \\\hline\end{array}$$

Question 72

Use exact interest. Round to nearest cent:
$$\begin{array} { | l | l | l | l | l | l | l | } \hline & & \text { Date } & \text { Date } & & \text { Simple } & \text { Amount } \\\text { Principal } & \text { Interest Rate } & \text { Borrowed } & \text { Repaid } & \text { Time } & \text { Interest } & \text { Paid Back } \\\hline \$ 15,000 & 12 \% & \text { May 12 } & \text { Sept 16 } & \text { A } & \text { B } & \text { C } \\\hline\end{array}$$

Question 73

Use ordinary interest:
$$\begin{array} { | l | l | l | l | l | l | l | } \hline \text { Principal } & \text { Interest } & \text { Date } & \text { Date } & & \text { Simple } & \text { Amount } \\& \text { Rate } & \text { Borrowed } & \text { Repaid } & \text { Time } & \text { Interest } & \text { Paid Back } \\\hline \$ 12,000 & 9 \% & \text { Apr 5 } & \text { Aug } 9 & \text { A } & \text { B } & \text { C } \\\hline\end{array}$$

Question 74

Round to nearest cent:
$$\begin{array} { | l | l | l | l | l | } \hline \text { Principal } & \text { Interest Rate } & \text { Time } & \begin{array} { l } \text { Simple } \\\text { Interest }\end{array} & \begin{array} { l } \text { Total Amount } \\\text { Owed }\end{array} \\\hline \$ 18,000 & 9 \% & 4 \mathrm { mos } & \mathrm { A } & \mathrm { B } \\\hline\end{array}$$

Question 75

Round all answers to the nearest cent. Woody's Café's real estate tax of $1,110.85 was due on November 1, 2017. Due to financial problems, Woody was unable to pay his café's real estate tax bill until January 15, 2018. The penalty for late payment is 8 1/4% ordinary interest. (A)What is the penalty Woody will have to pay and (B)what will Woody pay on January 15?

Question 76

Lou Valdez is buying a truck. His monthly interest is $155 at 10 1/4 %. What is Lou's principal balance after the beginning of November? Use 360 days. Round all answers to the nearest cent. DO NOT round the denominator in your calculation.

Question 77

Interest is $405 on a principal balance of $5,000; assuming a 7 month loan, what is the rate? Round to the nearest cent or hundredth percent as needed.

Question 78

Round all answers to the nearest cent. Angel Hall borrowed $82,000 for her granddaughter's college education. She must repay the loan at the end of nine years with 9¼% interest. What is the maturity value Angel must repay?

Question 79

Find A and B in the table below.
$$\begin{array} { | l | l | l | l | l | } \hline & & & \text { Simple } & \text { Total Amount } \\\text { Principal } & \text { Interest Rate } & \text { Time } & \text { Interest } & \text { Owed } \\\hline \$ 18,000 & 9 \% & 3 \text { yrs } & \text { A } & \text { B } \\\hline\end{array}$$

Question 80

Ron Tagney owns his own truck. His June interest is $210. The current rate of interest is 11%. Assuming a 360-day year, what was Ron's principal balance at the beginning of June? (Round to nearest cent.)