Deck 22: Borrowing Models

Question 1

Which is more costly: paying 11.5% simple interest for four years or paying 10% annual compounding interest for four years?

Answer 1

10% annual compounding

Question 2

Yvette takes out a conventional loan to purchase a car. The interest rate is 6.2% compounded monthly and Yvette has five years to repay the $9600 she borrowed. What are Yvette's monthly payments?

Answer 2

$186.49

Question 3

Your Great Aunt Sally loans you $1000 for seven months and asks that you repay it with simple interest at the rate of 1% per month. How much do you repay her after seven months?

Answer 3

$1070

Question 4

David takes out a conventional loan to purchase a car. The interest rate is 4.8% compounded quarterly and David has four years to repay the $8000 he borrowed. What are David's quarterly payments?

Question 5

Which is more costly: paying 2.5% simple interest for a six-month loan or paying 2.4% monthly compounding interest for six months?

Question 6

How much would you have to invest each quarter in an annuity earning 5% quarterly to earn $5000 at the end of five years?

Question 7

If you borrow $10,000 for two years under the condition that no interest is charged for the first six months, and a quarterly compounded interest rate of 12% applies for the remainder of the period, how much interest will you pay?

Question 8

Bill takes out a conventional loan to purchase a car. The interest rate is 5.2% compounded monthly and Bill has 10 years to repay the $15,000 he borrowed. What are Bill's monthly payments?

Question 9

Find the future value of an annuity with weekly deposits of $12, made over a period of five years, with 3.8% interest compounded weekly.

Question 10

Your Great Aunt Sally loans you $1000 for two years and asks that you repay it with simple interest at the rate of 5% per year. How much do you repay her after two years?

Question 11

Which is more costly: paying 12% simple interest for two years or paying 11% annual compounding interest for two years?

Question 12

Your Great Aunt Sally loans you $1000 for two years and asks that you repay it with annually compounding interest at the rate of 5% per year. How much do you repay her after two years?

Question 13

Your Great Aunt Sally loans you $5000 for three years and asks that you repay it with simple interest at the rate of 8% per year. How much do you repay her after three years?

Question 14

You invest $325 each quarter into an annuity earning 9% compounded quarterly. How much do you have at the end of 10 years?

Question 15

David takes out a conventional loan to purchase a car. The interest rate is 4.8% compounded quarterly and David has four years to repay the $12,000 he borrowed. What are David's quarterly payments?

Question 16

If you borrow $10,000 for three years at a quarterly compounding interest rate of 4% per year, how much interest will you pay?

Question 17

If you borrow $50,000 for three months at a monthly compounding rate of 18% per year, how much interest will you pay?

Question 18

Your Great Aunt Sally loans you $1000 for seven months and asks that you repay it with monthly compounding interest at the rate of 1% per month. How much do you repay her after seven months?

Question 19

Your Great Aunt Sally loans you $5000 for three years and asks that you repay it with annually compounding interest at the rate of 8% per year. How much do you repay her after three years?

Question 20

How much would you have to invest each month in an annuity earning 6% monthly to earn $50,000 at the end of 30 years?

Question 21

A credit card statement shows a daily interest rate of 0.0367%. What is the EAR?

Question 22

Which is a more favorable savings rate: 4.5% compounded monthly or 4.52% compounded quarterly?

Question 23

What would be the monthly payment on an add-on loan from a credit union at 5% over 36 months for the principal of $2000? Round to nearest cents.

Question 24

Which is a more favorable savings rate: 4.5% compounded monthly or 4.6% compounded annually?

Question 25

How much would you have to invest each month in an annuity earning 4.9% monthly to earn $35,000 at the end of 20 years?

Question 26

Find the future value of an annuity with weekly deposits of $50, made over a period of four years, with 6.8% interest compounded weekly.

Question 27

A 20-year annuity invests its assets at an annual rate compounded monthly. You invested in this annuity to get a monthly income of $300 per month. If you wanted to get $500 per month instead from the same annuity, what total would you have to invest?

Question 28

When applying for a loan of the amount of $5000, you received the principal $5000 minus $500 as an interest, but you must pay back the entire principal. What is this type of loan called?

Question 29

Which is a more favorable savings rate: 3.5% compounded monthly or 3.55% compounded quarterly?

Question 30

If you got a loan for $5000 at 5.54% APR compounded quarterly, what is the effective annual rate (EAR)? Use two decimal places.

Question 31

How much would you have to invest each quarter in an annuity earning 5.4% quarterly to earn $8000 at the end of 10 years?

Question 32

If you get a discounted loan for the principal of $2000 at an interest rate of 5% per year for three years, what will be the monthly payment? Round to nearest cents.

Question 33

Which is a more favorable savings rate: 3.5% compounded monthly or 3.6% compounded annually?

Question 34

A credit card statement shows a monthly interest rate of 1.89%. What is the EAR?

Question 35

What is the up-front investment required in an annuity paying out $500 per month over 10 years if the interest rate is 5% compounded monthly?

Question 36

You invest $100 each quarter into an annuity earning 8% compounded quarterly. How much do you have at the end of 30 years?

Question 37

If you buy a 20-year annuity with an up-front payment of $50,000, and an interest rate of 6% compounded monthly, how much monthly income will you receive?

Question 38

You invest $20 each month into an annuity earning 9.2% each compounded monthly. How much do you have at the end of 15 years?

Question 39

Which is a more favorable savings rate: 6% compounded monthly or 6.05% compounded quarterly?

Question 40

If you are offered a discounted loan at an interest rate of 5% per year for three years, how much do you need to borrow to cover the principal of $3000? Round to nearest cents.

Question 41

Your rich Uncle Ralph is willing to loan you $5000 for three years and asks that you repay your loan with simple interest at the rate of 9% per year. How much will you repay after three years?

A) $5270
B) $5350
C) $5900
D) $6350

Question 42

Ellie takes out a conventional loan to purchase a car. The interest rate is 7.5% compounded monthly and Ellie has four years to repay the $12,000 she borrowed. What are Ellie's monthly payments?

A) $95.46
B) $139.33
C) $169.53
D) $290.15

Question 43

Your rich Uncle Ralph is willing to loan you $50,000 for five months and asks that you repay your loan with monthly compounding interest at the rate of 24% per year. How much interest will you pay?

A) $5204
B) $5760
C) $5200
D) $5496

Question 44

Your rich Uncle Ralph is willing to loan you $50,000 for five years, so long as you pay interest each month. He asks for a simple interest rate of 24% per year. How much will you pay each month?

A) $1000
B) $2000
C) more than $2000
D) less than $1000

Question 45

Moe takes out a conventional loan to purchase a car. The interest rate is 8.3% compounded monthly and Moe has eight years to repay the $12,000 he borrowed. What are Moe's monthly payments?

A) $385.07
B) $305.21
C) $186.49
D) $171.48

Question 46

Which of these savings rates is most favorable?

A) 5% compounded annually
B) 5% compounded semi-annually
C) 5% compounded quarterly
D) 5% compounded monthly

Question 47

Which of these savings rates is most favorable?

A) 5% compounded annually
B) 4.9% compounded monthly
C) 4.8% compounded quarterly
D) 4.8% continuously compounded

Question 48

Your rich Uncle Ralph is willing to loan you $1000 for two years and asks that you repay your loan with simple interest at the rate of 12% per year. How much will you repay after two years?

A) $1024
B) $1240
C) $1254.40
D) $2400

Question 49

Your rich Uncle Ralph is willing to loan you $10,000 for eight months and asks that you repay your loan with simple interest at the rate of 12% per year. How much will you repay after eight months?

A) $10,080
B) $10,800
C) $10,120
D) $10,960

Question 50

Which of these loan rates is most favorable?

A) 12% compounded annually
B) 12% compounded monthly
C) 12% compounded quarterly
D) 12% continuously compounded

Question 51

Which of these savings rates is most favorable?

A) 4% compounded quarterly
B) 4% compounded semi-annually
C) 4% compounded monthly
D) 4% compounded annually

Question 52

Your rich Uncle Ralph is willing to loan you $1000 for two years and asks that you repay your loan with annual compounding interest at the rate of 10% per year. How much will you repay after two years?

A) $1200
B) $1121
C) $1210
D) $1110

Question 53

May takes out a conventional loan to purchase a car. The interest rate is 6.8% compounded monthly and May has six years to repay the $10,000 she borrowed. What are May's monthly payments?

A) $95.46
B) $139.33
C) $169.53
D) $290.15

Question 54

Which of these loan rates is most favorable?

A) 12% compounded annually
B) 11.5% compounded monthly
C) 11.5% compounded quarterly
D) 11% continuously compounded

Question 55

Karana takes out a conventional loan to purchase a car. The interest rate is 6.4% compounded monthly and Karana has 10 years to repay the $27,000 she borrowed. What are Karana's monthly payments?

A) $385.07
B) $305.21
C) $186.49
D) $171.48

Question 56

Which of these savings rates is most favorable?

A) 6% compounded annually
B) 5.8% compounded monthly
C) 5.9% compounded quarterly
D) 5.8% continuously compounded

Question 57

Which of these savings rates is most favorable?

A) 4% compounded annually
B) 3.9% compounded monthly
C) 3.9% compounded quarterly
D) 3.8% continuously compounded

Question 58

If college tuition increases by 3% per year, how does your fourth-year tuition compare with your first-year tuition?

A) It is 12% more.
B) It is 9% more.
C) It is about 9.3% more.
D) It is about 12.5% more.

Question 59

If college tuition increases by 4% per year, how does your fourth-year tuition compare with your first-year tuition?

A) about 12.5% more
B) about 16% more
C) about 17% more
D) about 12% more

Question 60

Your rich Uncle Ralph is willing to loan you $5000 for 3 1/2 years and asks that you repay your loan with quarterly compounding interest at the rate of 8% per year. How much will you repay after 3 1/2 years?

A) $6545.66
B) $5358.84
C) $6442.56
D) $6597.39

Question 61

Suppose a student loan has an interest rate of 5% compounded monthly with monthly payments and the borrower has 10 years to repay. If $9000 is borrowed, what are the monthly payments?

A) $95.46
B) $139.33
C) $169.53
D) $290.15

Question 62

Find the future value of an annuity with monthly deposits of $350, made over a period of five years, with 4% interest compounded monthly.

A) $13,721
B) $23,205
C) $23,292
D) $30,707

Question 63

A credit card bill shows a balance due of $1200 with a minimum payment of $24 and a monthly interest rate of 1.44%. What is the APR?

A) 17.28%
B) 18.72%
C) 19.44%
D) 21.26%

Question 64

Find the future value of an annuity with monthly deposits of $75, made over a period of 10 years, with 8% interest compounded monthly.

A) $13,721
B) $23,205
C) $23,292
D) $30,707

Question 65

A credit card bill shows a balance due of $1200 with a minimum payment of $24 and a monthly interest rate of 1.44%. What is the EAR?

A) 17.28%
B) 18.72%
C) 19.44%
D) 21.26%

Question 66

A credit card bill shows a daily interest rate of 0.062%. What is the EAR?

A) 25.39%
B) 27.18%
C) 28.12%
D) a different value

Question 67

Find the future value of an annuity with monthly deposits of $150, made over a period of 10 years, with 5% interest compounded monthly.

A) $13,721
B) $23,205
C) $23,292
D) $30,707

Question 68

A credit card bill shows a balance due of $2500 with a monthly interest rate of 1.53%. What is the APR?

A) 18.36%
B) 19.99%
C) 22.92%
D) 25.49%

Question 69

Suppose a student loan has an interest rate of 6.2% compounded monthly with monthly payments and the borrower has 10 years to repay. If $5000 is borrowed, what are the monthly payments?

A) $45.28
B) $56.01
C) $68.92
D) $73.10

Question 70

A credit card bill shows a balance due of $750 with a minimum payment of $15 and a monthly interest rate of 1.62%. What is the APR?

A) 17.28%
B) 18.72%
C) 19.44%
D) 21.26%

Question 71

A credit card bill shows a balance due of $750 with a minimum payment of $15 and a monthly interest rate of 1.62%. What is the EAR?

A) 17.28%
B) 18.72%
C) 19.44%
D) 21.26%

Question 72

You can afford monthly payments of $450, and you find a car dealer offering a 2.6% annual rate compounded monthly on a 4-year loan. Rounded to the nearest $100, what is the most expensive car you can afford?

A) $18,700
B) $18,900
C) $20,500
D) $21,600

Question 73

A credit card bill shows a daily interest rate of 0.062%. What is the APR?

A) 21.18%
B) 22.63%
C) 27.18%
D) a different value

Question 74

You can afford monthly payments of $250, and you find a car dealer offering a 3.9% annual rate compounded monthly on a 5-year loan. Rounded to the nearest $100, what is the most expensive car you can afford?

A) $13,200
B) $13,600
C) $15,000
D) $15,600

Question 75

Suppose a student loan has an interest rate of 5.8% compounded monthly with monthly payments and the borrower has 10 years to repay. If $35,000 is borrowed, what are the monthly payments?

A) $385.07
B) $305.21
C) $186.49
D) $171.48

Question 76

Find the future value of an annuity with monthly deposits of $250, made over a period of eight years, with 6% interest compounded monthly.

A) $13,721
B) $23,205
C) $23,292
D) $30,707

Question 77

A credit card bill shows a balance due of $980 with a monthly interest rate of 1.91%. What is the APR?

A) 18.36%
B) 19.99%
C) 22.92%
D) 25.49%

Question 78

A credit card bill shows a balance due of $2500 with a monthly interest rate of 1.53%. What is the EAR?

A) 18.36%
B) 19.99%
C) 22.92%
D) 25.49%

Question 79

Suppose a student loan has an interest rate of 7% compounded monthly with monthly payments and the borrower has 10 years to repay. If $12,000 is borrowed, what are the monthly payments?

A) $95.46
B) $139.33
C) $169.53
D) $290.15

Question 80

A credit card bill shows a balance due of $980 with a monthly interest rate of 1.91%. What is the EAR?

A) 18.36%
B) 19.99%
C) 22.92%
D) 25.49%