Question 1

Alain can purchase an airline ticket for $500 now or can pay $525 in 3 months. If interest is 2.5%, determine whether Alain should purchase the ticket now or in 3 months.

Accepted Answer

A)  Buy now - Savings of $33.88 
B)  Buy now - Savings of $21.74 
C)  No difference between two options 
D)  Buy later - savings of $33.88 
E)  Buy later - savings of $21.74

Question 2

What will be the maturity value of $3,300 invested at an interest rate of 2.75% in 15 months?

Accepted Answer

The answer of What will be the maturity value of...

Question 3

Nine months ago, Muriel agreed to pay Aisha $1,200 and $800 on dates 6 and 12 months, respectively, from the date of the agreement. With each payment Muriel agreed to pay interest at the rate of 8.5% from the date of the agreement. Muriel failed to make the first payment and now wishes to settle her obligations with a single payment four months from now. What payment should Aisha be willing to accept if money can earn 6.75%?

Accepted Answer

The answer of Nine months ago, Muriel agreed to pay...

Question 4

Nicholas can purchase the same furniture from Store A for $2,495 cash or from Store B for $2,560 with nothing down and no payments or interest for 8 months. Which option should Nicholas choose if he can pay for the furniture by cashing in Canada Savings Bonds currently earning 3.9% per annum?

Accepted Answer

The answer of Nicholas can purchase the same furniture from...

Question 5

Calculate the amount of interest that would be earned on an account of $216,000 if it earned 5.15% for 27 days.

Accepted Answer

A)  $11,298 
B)  $11,124 
C)  $823 
D)  $1,744 
E)  $2,110

Question 6

Sumer put $10,000 in a 3-month term deposit at TD Canada Trust, earning a simple interest rate of 3.9% pa. After the 3 months, she invested the entire amount of the principal and interest from the first term deposit in a new 3-month term deposit earning the same rate of interest. How much interest did she earn on each term deposit? Why are the two interest amounts not equal?

Accepted Answer

The answer of Sumer put $10,000 in a 3-month term...

Question 7

How can you determine whether two payment streams are equivalent to each other?

Accepted Answer

The answer of How can you determine whether two payment...

Question 8

Compare the economic values of two options given an annual rate of 8.5%. Option 1 - $900 in 60 days and $1,200 in 180 days. Option 2 - $925 in 90 days and $1,050 in 120 days. Given the following information, choose the best option.

Accepted Answer

A)  Option 1 - benefit of $111.85 
B)  Option 1 - benefit of $138.45 
C)  No difference between options 
D)  Option 2 - benefit of $111.85 
E)  Option 2 - benefit of $138.45

Question 9

If you pay your $3,000 tuition 3 months before it is due, the local college will give you a $250 "scholarship" reducing your tuition payment to $2,750. What is the annual simple interest rate to which this incentive is equal?

Accepted Answer

A)  36.4% 
B)  9.1% 
C)  8.3% 
D)  33.3% 
E)  27.3%

Question 10

Calculate the size of the equal payments. Use the loan date as the focal date.

Accepted Answer

The answer of Calculate the size of the equal payments....

Question 11

In how many months will $6,000 earn interest of $2,700 at 15%?

Accepted Answer

A)  3 months 
B)  36 months 
C)  4 months 
D)  60 months 
E)  1 month

Question 12

How many days will it take for an investment of $5,500 to earn $602.74 interest at 16%?

Accepted Answer

A)  68 
B)  22 
C)  230 
D)  250 
E)  4564

Question 13

What principal will grow to $12,031.25 at 7.5% interest in 15 months?

Accepted Answer

A)  $10,000.00 
B)  $11,000.00 
C)  $15,000.00 
D)  $20,000.00 
E)  $21,000.00

Question 14

Compare the economic values of two options given an annual rate of 6.6%. Option 1 - $900 in 90 days and $1,200 in 120 days. Option 2 - $850 in 240 days and $1,390 in 320 days. Given the following information, choose the best option.

Accepted Answer

A)  Option 1 - benefit of $22.35 
B)  Option 1 - benefit of $68.51 
C)  No difference between options 
D)  Option 2 - benefit of $22.35 
E)  Option 2 - benefit of $68.51

Question 15

An investment of $ 19,250 grew to $20,000 between March 26 and October 10. What simple annual interest rate did the investment earn?

Accepted Answer

A)  3.9% 
B)  8.5% 
C)  6.9% 
D)  5.5% 
E)  7.2%

Question 16

Barkley's Bookkeeper is accounting for a cheque that was written for $29,674. It represents full payment of principal plus interest for a loan that was taken out for 128 days at 8.5%. How much of the $ 29,674 was interest?

Accepted Answer

A)  $2,881.51 
B)  $884.52 
C)  $1,768.33 
D)  $858.93 
E)  $726.98

Question 17

Mike is supposed to pay $750 to Sarah, but wishes to delay it for 48 days. Determine the amount Sarah should expect in 48 days if the rate of interest is 6.55%

Accepted Answer

A)  $756.46 
B)  $765.66 
C)  $771.55 
D)  $793.12 
E)  $795.61

Question 18

After a term of 23 days, a loan at 10.5% has a maturity value of $785.16. What was the principal value of the loan?

Accepted Answer

The answer of After a term of 23 days, a...

Question 19

Two debt payments of $2,000 each are due now and nine months from now. If money is worth 8%, what single payment six months from now is required to settle the debt?

Accepted Answer

A)  $4,042.34 
B)  $7,177.27 
C)  $6,127.48 
D)  $3,600.00 
E)  $4,040.78

Question 20

What amount received on January 13 is equivalent to $1,000 received on the preceding August 12 if money can earn 5.5%?

Accepted Answer

The answer of What amount received on January 13 is...

Exam 6: Simple Interest