Exam
Name___________________________________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Convert the given interest rate to decimal form if it is given as a percentage, and to a percentage if it is given in decimal
form.
1)
11.6% to decimal
A)
11.6
B)
116
C)
0.116
D)
0.00116
Answer:
C
2)
0.05% to decimal
A)
0.5
B)
5.0
C)
0.0005
D)
0.05
Answer:
C
3)
0.05 to percent
A)
0.0005%
B)
50%
C)
0.05%
D)
5%
Answer:
D
4)
0.25 to percent
A)
0.0025%
B)
25%
C)
2.5%
D)
2.25%
Answer:
B
Make the indicated conversion. Assume a 360–day year as needed.
5)
150 days to a simplified fraction of year
A)
15
12
B)
5
36
C)
15
365
D)
5
12
Answer:
D
6)
8 months to simplified fraction of a year
A)
66
100
B)
1
45
C)
8
12
D)
2
3
Answer:
D
Use I = Prt for simple interest to find the indicated quantity.
7)
P = $22,660; r = 13%; 2.4 years. Find I.
A)
$15,590.08
B)
$7069.92
C)
$29,729.92
D)
$2945.80
Answer:
B
8)
I = $750; r = 6%; t = 6 months. Find P.
A)
$22.50
B)
$25,750
C)
$24,250
D)
$25,000
Answer:
D
9)
P = $3000; t = 90 days; I = $105. Find r. (Use 360 days in a year.)
A)
3.5%
B)
14.2%
C)
9.7%
D)
14.0%
Answer:
D
1
10)
P = $13,500; t = 4 months; I = $517.50. Find r.
A)
7.7%
B)
11.5%
C)
11.7%
D)
3.8%
Answer:
B
Use the formula A = P(1 + rt) to find the indicated quantity.
11)
P = $7996; r = 6%; t = 10 months. Find A.
A)
$8475.76
B)
$8395.80
C)
$399.80
D)
$6663.33
Answer:
B
12)
Allan borrowed $5500 from his father to buy a car. He repaid him after 10 months with interest of 5% per year.
Find the total amount he repaid.
A)
$229.17
B)
$5775.00
C)
$5706.25
D)
$5729.17
Answer:
D
13)
A = $16,400; r = 10%; 90 days. Find P.
A)
$16,400
B)
$400.00
C)
$16,000
D)
$16,810
Answer:
C
Solve the problem. Round dollar amounts to the nearest cent. Use 360 days.
14)
Polson Associates bought a new computer system. To pay for the system, they borrowed $41,950 from the bank
at 8 3
4% interest for 130 days. Find the simple interest.
A)
$3670.63
B)
$1315.31
C)
$1325.50
D)
$1307.35
Answer:
C
15)
What is the purchase price of a 26–week T–bill with a maturity value of $1000 that earns an annual interest rate
of 5.25%?
A)
$1000
B)
$25.58
C)
$974.42
D)
$1025.58
Answer:
C
16)
HarbourTown Marina purchased four boat lifts for raising and lowering large boats into the water. The boat
lifts cost $61,300 each. They borrowed the money from the bank for 240 days at 10%. Find the maturity value.
A)
$65,386.67
B)
$261,546.67
C)
$67,430.00
D)
$269,720.00
Answer:
B
Find the amount that will be accumulated in the account under the given conditions.
17)
The principal $15,400 is accumulated with simple interest of 16% for 5 years.
A)
$20,212.50
B)
$27,720
C)
$12,320
D)
$15,892.80
Answer:
B
Solve the problem. Assume that simple interest is being calculated in each case. Round your answer to the nearest cent.
18)
John Lee’s savings account has a balance of $4466. After 15 months, what will the amount of interest be at 2.8%
per year?
A)
$140.05
B)
$125.05
C)
$156.31
D)
$297.73
Answer:
C
2
SHORT ANSWER. Write the word or phrase that best completes each statement or answers the question.
Provide an appropriate response.
19)
Find the amount due on a loan of $8,500 at 7.5% simple interest at the end of 4 years.
Answer:
$11,050
20)
If you pay $5,500 for a simple interest note that will be worth $6,000 in 21 months, what annual simple interest
rate will you earn? (Compute the answer to one decimal place.)
Answer:
5.2%
21)
If an investor buys a 39–week T–bill with a maturity value of $25,000 for $23,543 what annual interest rate
(annual yield) will the investor earn? (Express your answer as a percentage, correct to one decimal place.)
Answer:
8.3%
22)
An investor purchased 500 shares of a stock at $19 per share. The commission she paid to buy the stock was $65
plus 0.3% of the principal amount. Six months later she sold the stock for $20.50 per share. If she paid the same
rate of commission to sell the stock, what annual rate of interest (annual yield) did she earn on her initial
investment (including purchase price plus commission)? Express your answer as a percentage, correct to one
decimal place.
Answer:
11.7%
23)
An investor purchased 150 shares of a stock at $15.80 per share. The investor holds the stock for 39 weeks and then sells
the stock for $19.25 per share. Use the commission schedule for this company given below to find the annual rate of
interest earned by this investor. Express your answer as a percentage, correct to one decimal place.
Principle Commission
Under $2500 $25 + 1.6% of principle
$2500
– $7500 $38 + 1.1% of principle
Over $7500 $105 + 0.5% of principle
Answer:
21.1%
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Use the average daily balance method to compute the amount of interest that will be charged at the end of the billing
cycle. Use a 365–day year.
24)
Month: July (31 days)
Previous month’s balance: $840
Interest rate: 20%
Date Transaction
July 5 made payment of $205
July 15 purchase of $41
July 20 purchase of $90
July 27 purchase of $70
A)
$10.56
B)
$12.40
C)
$10.66
D)
$10.92
Answer:
B
3
25)
Month: May (31 days)
Previous month’s balance: $960
Interest rate: 19%
Date Transaction
May 3 made payment of $380
May 12 purchase of $108
May 21 purchase of $95
May 29 made payment of $70
A)
$7.88
B)
$12.35
C)
$11.31
D)
$8.76
Answer:
C
26)
Month: February (28 days)
Previous month’s balance: $1240
Interest rate: 22%
Date Transaction
February 3 made payment of $320
February 12 purchase of $325
February 21 purchase of $38
February 22 purchase of $68
A)
$15.96
B)
$19.71
C)
$18.22
D)
$8.31
Answer:
B
27)
Month: April (30 days)
Previous month’s balance: $960
Interest rate: 21%
Date Transaction
April 3 purchase of $101
April 12 made payment of $340
April 21 purchase of $92
April 29 made payment of $69
A)
$14.93
B)
$14.07
C)
$11.61
D)
$17.50
Answer:
A
Solve the problem. Assume that the minimum payment on a credit card is the greater of $27 or 3% of the unpaid balance.
28)
Find the minimum payment on an unpaid balance of $1584.40.
A)
$52.53
B)
$47.53
C)
$27.00
D)
$475.32
Answer:
B
29)
Find the minimum payment on an unpaid balance of $787.71.
A)
$28.63
B)
$236.31
C)
$23.63
D)
$27.00
Answer:
D
30)
If the annual interest rate is 15.99%, find the difference between the minimum payment and the interest owed
on an unpaid balance of $748.44 that is 1 month overdue.
A)
$12.54
B)
$13.10
C)
$17.03
D)
$14.03
Answer:
C
Find the compound interest earned. Round to the nearest cent.
31)
$700 at 8% compounded semiannually for 4 years
A)
$252.34
B)
$595.65
C)
$258.00
D)
$118.90
Answer:
C
4
32)
$600 at 5% compounded quarterly for 1 1
2 years
A)
$204.06
B)
$95.82
C)
$95.45
D)
$46.43
Answer:
D
33)
$14,000 at 5% compounded annually for 3 years
A)
$2100.00
B)
$1435.00
C)
$701.50
D)
$2206.75
Answer:
D
Find the compound amount for the deposit. Round to the nearest cent.
34)
$600 at 8% compounded quarterly for 5 years
A)
$840.00
B)
$881.60
C)
$662.45
D)
$891.57
Answer:
D
35)
$1100 at 3% compounded quarterly for 2 years
A)
$1116.56
B)
$1167.76
C)
$1166.99
D)
$1166.00
Answer:
B
36)
$15,000 at 10% compounded semiannually for 10 years
A)
$39,799.47
B)
$24,433.42
C)
$38,906.14
D)
$30.000.00
Answer:
A
SHORT ANSWER. Write the word or phrase that best completes each statement or answers the question.
Provide an appropriate response.
37)
What amount will be in an account after 1.5 years if $4,000 is invested at 5% compounded semiannually?
Answer:
$4,307.56
38)
An investment company pays 7% compounded quarterly. What is the effective rate? (Compute the answer to
two decimal places).
Answer:
7.19%
39)
How much should you invest now at 6% compounded semiannually to have $8,500 to buy a car in 2.5 years?
Answer:
$7,332.17
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Solve the problem.
40)
How long will it take for $3000 to grow to $22,600 at an interest rate of 3.1% if the interest is compounded
continuously? Round the number of years to the nearest hundredth.
A)
6.51 yr
B)
65.14 yr
C)
0.65 yr
D)
6513.99 yr
Answer:
B
41)
Jennifer invested $6000 in her savings account for 7 years. When she withdrew it, she had $9004.82. Interest
was compounded continuously. What was the interest rate on the account? Round to the nearest tenth of a
percent.
A)
5.7%
B)
5.95%
C)
5.9%
D)
5.8%
Answer:
D
5
What is the annual percentage yield (APY) for money invested at the given annual rate? Round results to the nearest
hundredth of a percent.
42)
5% compounded semiannually
A)
5.06%
B)
5.13%
C)
5.00%
D)
5.09%
Answer:
A
43)
3.5% compounded continuously.
A)
3.50%
B)
3.53%
C)
3.55%
D)
3.56%
Answer:
D
44)
6% compounded quarterly
A)
6.14%
B)
6.09%
C)
6.18%
D)
6.00%
Answer:
A
Solve the problem.
45)
The State Employees’ Credit Union offers a 1–year certificate of deposit with an APY (or effective rate) of 5.5%.
If interest is compounded quarterly, find the actual interest rate. Round to the nearest tenth of a percent.
A)
5.4%
B)
6.4%
C)
5.1%
D)
5.6%
Answer:
A
Solve the problem. Round to the nearest cent as needed.
46)
Samantha’s savings account has a balance of $4643. After 25 years, what will the amount of interest be at 6%
compounded annually?
A)
$15,289.16
B)
$15,275.16
C)
$15,284.16
D)
$2785.80
Answer:
C
47)
Brandon’s savings account has a balance of $4069. After 4 years what will the amount of interest be at 5%
compounded quarterly?
A)
$899.73
B)
$894.73
C)
$101.73
D)
$885.73
Answer:
B
48)
A bank has $750,000 to lend for 7 months. It can lend it to a local contractor at a simple interest rate of 12%, or it
can lend it to a small business that will pay 12% compounded monthly. If the bank wants to maximize its
interest earned, who should receive the loan (contractor or business) and what is the additional interest earned?
A)
Contractor; $52,500
B)
Business; $1601.51
C)
Contractor; $1601.51
D)
Business; $54,101.51
Answer:
B
49)
How long will it take for $8400 to grow to $14,600 at an interest rate of 9.4% if the interest is compounded
continuously? Round the number of years to the nearest hundredth.
A)
0.59 year
B)
0.06 year
C)
5.88 years
D)
58.81 years
Answer:
C
50)
An actuary for a pension fund need to have $14.6 million grow to $22 million in 6 years. What interest rate
compounded annually does he need for this investment to growth as specified. Round your answer to the
nearest hundredth of a percent.
A)
0.07%
B)
7%
C)
7.7%
D)
7.07%
Answer:
D
6
51)
The rabbit population in a forest area grows at the rate of 6% monthly. If there are 230 rabbits in April, find how
many rabbits (rounded to the nearest whole number) should be expected by next April. Use y =230(2.7)0.06t
A)
447
B)
457
C)
483
D)
470
Answer:
D
52)
Cheraw Auto Repair believes that it will need new equipment in 10 years. The equipment will cost $26,000.
What lump sum should be invested today at 8% compounded semiannually, to yield $26,000?
A)
$21,097.18
B)
$17,462.98
C)
$11,866.06
D)
$17,637.61
Answer:
C
53)
The bacteria in a 11–liter container double every 2 minutes. After 53 minutes the container is full. How long did
it take to fill a quarter of the container?
A)
13.3 min
B)
26.5 min
C)
49 min
D)
39.8 min
Answer:
C
54)
Cara knows that she will need to buy a new car in 3 years. The car will cost $15,000 by then. How much should
she invest now at 12%, compounded quarterly, so that she will have enough to buy a new car?
A)
$10,520.70
B)
$12.594.29
C)
$11,957.91
D)
$9532.77
Answer:
A
SHORT ANSWER. Write the word or phrase that best completes each statement or answers the question.
55)
A child receives a $10,000 gift toward a college education from her grandparents on her first birthday. How
much money will it be worth in 17 years if it is invested at 8.25% compounded quarterly? Round your answer
to the nearest cent.
Answer:
$40,077.60
56)
How many months will it take until an account will have $3,500 if $2,500 is invested now at 5% compounded
monthly?
Answer:
81 months or 6 years, 9 months
Provide an appropriate response.
57)
A bank account starts with $1,000 in it. Interest is paid at 6% annual interest, compounded monthly. Graph the
exact function for the amount in the account over the first 12 months. Use vertical scale [900, 1,200].
Answer:
[0, 12] by [900, 1,200]
7
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Find i (the rate per period) and n (the number of periods) for the annuity.
58)
Semiannual deposits of $400 are made for 10 years into an annuity that pays 7% compounded semiannually.
A)
i = 0.07; n = 10
B)
i = 0.035; n = 20
C)
i = 0.35; n = 10
D)
i = 0.0175; n = 40
Answer:
B
59)
Monthly deposits of $1600 are made for 6 years into an annuity that pays 9% compounded monthly.
A)
i = 0.75; n = 12
B)
i = 0.0075; n = 72
C)
i = 0.75; n = 6
D)
i = 0.09; n = 72
Answer:
B
Use the future value formula to find the indicated value. Round to three decimal places.
60)
n =10; i =0.02; PMT = $1; FV = ?
A)
$10.95
B)
$60.95
C)
$12.169
D)
$9.755
Answer:
A
61)
n = 13; i = 0.04; PMT = $1000; FV = ?
A)
$16,627.838
B)
$18,292.371
C)
$15,026.247
D)
$41,627.144
Answer:
A
Find the future value of the ordinary annuity. Interest is compounded annually, unless otherwise indicated.
62)
PMT = $7,500, i =3% interest compounded semiannually for 3 years
A)
$46,721.63
B)
$38,642.00
C)
$546,721.63
D)
$265,225.00
Answer:
A
Find the periodic payment that will render the sum.
63)
FV = $24,000, interest is 8% compounded monthly, payments made at the end of each month for 3 years
A)
$1264.68
B)
$7104.88
C)
$592.07
D)
$1927.72
Answer:
C
Solve the problem.
64)
At the end of every 3 months, Judy deposits $100 into an account that pays 6% compounded quarterly. After 4
years, she puts the accumulated amount into a certificate of deposit paying 7.5% compounded semiannually for
1 year. When this certificate matures, how much will Judy have accumulated?
A)
$1930.25
B)
$1823.20
C)
$1920.96
D)
$2072.31
Answer:
A
65)
If $300,000 is to be saved over 25 years, how much should be deposited monthly if the investment earns 8%
interest compounded monthly?
A)
$315.45
B)
$180.48
C)
$260.87
D)
$216.62
Answer:
A
SHORT ANSWER. Write the word or phrase that best completes each statement or answers the question.
66)
What is the future value of an ordinary annuity at the end of 3 years if $200 is deposited each quarter into an
account earning 6% compounded quarterly?
Answer:
$2,608.24
67)
You deposit $130 each month into a savings account that pays 5.5% compounded monthly. How much interest
will you have earned after 8 years?
Answer:
$3,152.54
8
68)
An ordinary annuity has a value of $1,333.85 at the end of 4 years when $150 is deposited every 6 months into
an account earning 6% compounded semiannually. How much interest has been earned?
Answer:
$133.85
69)
A couple decides on the following savings plan for their child’s college education. When the child is 6 months
old, and every 6 months thereafter, they will deposit $310 into a savings account paying 9.5% interest
compounded semi–annually. After the child’s tenth birthday, having made 20 such payments, they will stop
making deposits and let the accumulated money earn interest, at the same rate, for 8 more years, until the child
is 18 years old and ready for college. How much money (to the nearest dollar) will be in the account when the
child is ready for college?
Answer:
$20,978
70)
You can afford monthly deposits of $200 into an account that pays 8% compounded monthly. How many
months will it be until you have $15,000 to buy a car? (Round up to the next higher month if not an integer.)
Answer:
62 months, or 5 years, 2 months
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Solve the problem. Round to the nearest cent.
71)
Joe wants to start an SEP–IRA that will have $460,000 in it when he retires in 15 years. How much should he
invest semiannually in his IRA to do this if the interest is 15% compounded semiannually?
A)
$44.35.77
B)
$17,612.13
C)
$4790.74
D)
$4448.77
Answer:
D
72)
Larry wants to start an IRA that will have $620,000 in it when he retires in 26 years. How much should he invest
semiannually in his IRA to do this if the interest is 6% compounded semiannually?
A)
$5094.65
B)
$3969.83
C)
$16,081.74
D)
$5081.65
Answer:
A
73)
Cara needs $9,000 in 12 years. What amount can she deposit at the end of each quarter at 6% interest
compounded quarterly so she will have her $9,000?
A)
$125.68
B)
$133.23
C)
$533.49
D)
$129.37
Answer:
D
Find the rate of interest required to achieve the conditions set forth.
74)
A = $32,000
P = $8,000
t = 20 years
compounded annually
A)
7.1773%
B)
8%
C)
3.5265%
D)
5.6467%
Answer:
A
75)
A = $32,000
P = $8,000
t = 20 years
compounded quarterly
A)
3.4959%
B)
3.5489%
C)
6.9919%
D)
5.5310%
Answer:
C
9
76)
If Jay bought a lot for $8,000 and sold it 15 years later for $24,000, what was her percentage rate of return on this
investment if it was compounded annually?
A)
8.7104%
B)
9.6825%
C)
7.5990%
D)
3.7995%
Answer:
C
Find i (the rate per period) and n (the number of periods) for the loan at the given annual rate.
77)
Annual payments of $378.80 are made for 8 years to repay a loan at 6.4% compounded annually.
A)
i = 0.064; n = 8
B)
i = 0.00533; n = 12
C)
i = 0.064; n = 16
D)
i = 0.008; n = 8
Answer:
A
78)
Quarterly Payments of $3000 are made for 4 years to repay a loan at 10.2% compounded quarterly.
A)
i = 0.102; n = 16
B)
i = 0.0255; n = 16
C)
i = 0.0255; n = 4
D)
i = 0.006375; n = 4
Answer:
B
Solve for the missing value. Round to four decimal places.
79)
n =24; i =0.09; PMT = $1; PV = ?
A)
$12.5156
B)
$9.5802
C)
$9.7066
D)
$9.8226
Answer:
C
80)
n = 30; i = 0.03; PMT = $100; PV = ?
A)
$1960.0441
B)
$4706.6287
C)
$1918.1585
D)
$2000.0441
Answer:
A
Solve the problem.
81)
Sammy borrowed $10,000 to purchase a new car at an annual interest rate of 11%. She is to pay it back in equal
monthly payments over a 5–year period. How much total interest will be paid over the period of the loan?
Round to the nearest dollar.
A)
$92
B)
$3630
C)
$1435
D)
$3045
Answer:
D
Find the present value of the ordinary annuity.
82)
Payments of $68 made quarterly for 10 years at 8% compounded quarterly
A)
$1872.41
B)
$1860.17
C)
$1829.38
D)
$667.63
Answer:
B
Find the payment necessary to amortize the loan.
83)
$12,800; 12% compounded monthly; 48 monthly payments
A)
$1542.69
B)
$337.31
C)
$331.71
D)
$337.07
Answer:
D
84)
$2200; 12% compounded quarterly; 8 quarterly payments
A)
$282.23
B)
$313.64
C)
$442.87
D)
$313.40
Answer:
D
Find the monthly house payment necessary to amortize the following loan.
85)
In order to purchase a home, a family borrows $70,000 at 12% for 15 years. What is the monthly payment?
A)
$902.99
B)
$700.00
C)
$46.67
D)
$840.12
Answer:
D
10
86)
In order to purchase a home, a family borrows $267,000 at 10.8% for 15 yr. What is their monthly payment?
Round the answer to the nearest cent.
A)
$3394.52
B)
$19,108.39
C)
$2403.00
D)
$3001.27
Answer:
D
Solve the problem. Round to the nearest cent as needed.
87)
The monthly payments on a $73,000 loan at 13% annual interest are $807.38. How much of the first monthly
payment will go toward the principal?
A)
$790.83
B)
$104.96
C)
$702.42
D)
$16.55
Answer:
D
88)
The monthly payments on a $79,000 loan at 14% annual interest are $982.76. How much of the first monthly
payment will go toward interest?
A)
$921.67
B)
$845.17
C)
$137.59
D)
$1106.00
Answer:
A
SHORT ANSWER. Write the word or phrase that best completes each statement or answers the question.
89)
You have decided to buy a new stereo system for $2,500 and agreed to pay in 30 equal quarterly payments at
1.25% interest per quarter on the unpaid balance. How much are your payments?
Answer:
$100.45
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Use an amortization table to solve the problem. Round to the nearest cent.
90)
The monthly payments on a $73,000 loan at 13% annual interest are $807.38. How much of the first monthly
payment will go toward the principal?
A)
$104.96
B)
$790.83
C)
$16.55
D)
$702.42
Answer:
C
91)
The monthly payments on a $76,000 loan at 12% annual interest are $836.76. How much of the first monthly
payment will go toward interest?
A)
$100.41
B)
$736.35
C)
$760.00
D)
$912.00
Answer:
C
SHORT ANSWER. Write the word or phrase that best completes each statement or answers the question.
92)
You have purchased a new house and have a mortgage for $90,000 at 6% compounded monthly. The loan is
amortized over 20 years in equal monthly payments of $644.79. Find the total amount paid in interest when the
mortgage is paid off.
Answer:
$64,749.60
93)
A $90,000 home was financed by making a 20% down payment and signing a 30–year mortgage at 6.25%
annual interest compounded monthly for the unpaid balance. The first payment is $443.32. How much of the
first month’s payment will apply towards reducing the principal?
Answer:
$68.32
94)
A bank makes a home mortgage loan of $180,000 at 7.25% amortized in equal monthly payments over 30 years.
What is the total amount paid in interest when the mortgage is paid off (round to the nearest dollar)?
Answer:
$262,051.20
11
95)
A $7,000 debt is to be amortized in 15 equal monthly payments of $504.87 at 1.00% interest per month on the
unpaid balance. What is the unpaid balance after the second payment?
Answer:
$6,125.91
96)
A home was purchased 14 years ago for $70,000. The home was financed by paying a 20% down payment and
signing a 25 year mortgage at 8.5% compounded monthly on the unpaid balance. The market value is now
$100,000. The owner wishes to sell the house. How much equity (to the nearest dollar) does the owner have in
the house after making 168 monthly payments?
Answer:
$61,414
97)
You have agreed to pay off a $8,000 loan in 30 monthly payments of $298.79 per month. The interest rate of the
loan is 0.75% per month on the unpaid balance. What is the unpaid balance after 12 monthly payments have
been made?
Answer:
$5,013.45
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Solve the problem. Assume no new purchases are made with the credit card.
98)
The annual interest rate on a credit card is 20.99%. If a payment of $100.00 is made each month, how long will it
take to pay off an unpaid balance of $1546.15?
A)
19 months
B)
18 months
C)
13 months
D)
21 months
Answer:
A
12