Chapter 12 1 Find The Annual Percentage Rate Using The

Exam

Name___________________________________

SHORT ANSWER. Write the word or phrase that best completes each statement or answers the question.

Solve the problem.

1)

An architecture firm purchases 5 new workstations for $4000.00 each. The firm makes a

down payment of $8000.00 and amortizes the balance with monthly loan payments to the

bank of 10% for 3 years. Use the abbreviated loan payoff table to prepare an amortization

schedule showing the first 5 payments.

1)

Provide an appropriate response.

2)

Explain how to determine the amount of each equal monthly mortgage payment that is

going toward interest and the amount going toward principal.

2)

Solve the problem.

3)

A construction firm pays $5000.00 for a new piece of equipment. It amortizes the loan for

the piece of equipment in 4 annual payments at 6% Use the abbreviated amortization table

to prepare an amortization schedule for this piece of equipment.

Interest Rate per Period

Period 4% 6% 8% 10%

1 1.04000 1.06000 1.08000 1.10000

2.53020 .54544 .56077 .57619

3.36035 .37411 .38803 .40211

4.27549 .28859 .30192 .31547

3)

Provide an appropriate response.

4)

Explain the difference between the unpaid balance method and the average daily balance

method of calculating finance charges.

4)

5)

Explain the procedure used to determine the unearned interest using the Rule of 78.

5)

6)

Explain the difference between the Amortization Table and the Loan Payoff Table.

6)

7)

Explain how to construct a repayment schedule.

7)

8)

Explain why the approximate APR is not the APR that is disclosed to the borrower on an

installment loan.

8)

9)

Explain how to use the APR Table to determine the true APR.

9)

10)

Explain the method used to handle a partial prepayment of a loan using the US Rule.

10)

11)

Explain how the average daily balance is determined.

11)

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

Find the balance due on the maturity date of the note. Find the total amount of interest paid on the note. Use the United

States Rule.

12)

Principal: $60,000

Interest: 10%

Time (days): 180

Partial payment: $20,000 on day 60

$20,000 on day 120

12)

A)

$23,866.67; $3866.67

B)

$21,652.18; $1652.18

C)

$24,022.42; $4022.42

D)

$22,044.72; $2044.72

Solve the problem.

13)

The Smith’s addition to their house is going to cost $23,150. On March 2 they sign a note at 9.5%

interest due in 200 days. They make a partial payment on April 30 of $8000. What is the amount

due on the maturity date? What is the amount of interest charged?

13)

A)

$15,713.71, $924.14

B)

$16,087.55, $937.55

C)

$16,032.63, $882.63

D)

$16,520.23, $1370.10

Find the finance charge on the revolving charge account. Assume interest is calculated on the unpaid balance of the

account. Round to the nearest cent.

14)

Unpaid Balance Monthly Interest Rate

$2199.01 1.5%

14)

A)

$16.49

B)

$32.99

C)

$329.85

D)

$30.79

Use the loan payoff table to find the monthly payment and finance charge for the loan.

15)

Amount financed: $8563

Number of months: 36

APR: 9%

15)

A)

$272.30, $1239.80

B)

$268.36, $1097.96

C)

$238.48, $22.28

D)

$276.33, $1384.88

Find the unpaid balance at the end of the month for the account.

16)

Unpaid

Balance at Finance

Month Beginning Charge Purchases Returns Payment

Jan $533.30 $127.86 $42.14 $95.00

Feb $192.93 $110.00

Finance rate is 1.7% on the unpaid balance.

Find unpaid balance at the end of Feb.

16)

A)

$533.09

B)

$625.08

C)

$432.15

D)

$667.22

Solve the problem.

17)

The monthly payments on a $80,000 loan at 61

2% interest for 20 years is $596.80. How much of the

first monthly payment will go toward interest?

17)

A)

$38.79

B)

$520.00

C)

$433.33

D)

$558.01

Use the loan payoff table to find the monthly payment and finance charge for the loan.

18)

Amount financed: $11,197

Number of months: 24

APR: 13%

18)

A)

$439.15, $657.40

B)

$532.31, $1578.44

C)

$537.57, $1704.68

D)

$527.04, $1451.96

Solve the problem.

19)

The Montgomerys borrowed $90,000 at 7 1

2% for 30 years to purchase a house. Find the monthly

payment and the sum of the principal and interest charges.

19)

A)

$665.10, $239,436.00

B)

$660.60, $237,816.00

C)

$598.50, $215,460.00

D)

$630.00, $226,800.00

Find the finance charge for the following revolving charge account. Assume that interest is calculated on the average

daily balance of the account.

20)

Average Daily Balance Monthly Interest Rate

$1297.43 11

4%

20)

A)

$16.22

B)

$162.18

C)

$12.97

D)

$19.46

Find the balance due on the maturity date of the note. Find the total amount of interest paid on the note. Use the United

States Rule.

21)

Principal: $167

Interest: 12%

Time (days): 30

Partial payment: $50 on day 20

21)

A)

$119.60; $2.60

B)

$120.70; $3.70

C)

$118.50; $1.50

D)

$121.40; $4.40

Find the finance charge on the revolving charge account. Assume interest is calculated on the unpaid balance of the

account. Round to the nearest cent.

22)

Unpaid Balance Monthly Interest Rate

$11,943.80 11

4%

22)

A)

$119.44

B)

$1492.98

C)

$149.30

D)

$74.65

Use the real estate amortization table to find the monthly payment for the loan.

23)

What is the monthly payment on a 10–year loan of $85,000 if the annual interest rate is 6%?

23)

A)

$954.55

B)

$717.40

C)

$608.60

D)

$943.50

Find the total monthly payment including taxes and insurance for the loan. Round to the nearest cent.

24)

Amount of loan: $73,000

Interest rate: 71

2%

Term of loan: 20 years

Annual taxes: $1545

Annual insurance: $522

24)

A)

$848.96

B)

$588.38

C)

$760.63

D)

$738.00

Find the annual percentage rate using the annual percentage rate table.

11

25)

Amount Financed: $800

Finance Charge: $200.80

Number of monthly payments: 48

25)

A)

10.75%

B)

11.50%

C)

12.00%

D)

11.25%

Find the unpaid balance at the end of the month for the account.

26)

Unpaid

Balance at Finance

Month Beginning Charge Purchases Returns Payment

Mar $651.20 $51.87 $43.56 $85.00

Apr $43.96 $125.00

May $76.02 $45.95 $150.00

Finance rate is 1.3% on the unpaid balance.

Find unpaid balance at the end of May.

26)

A)

$582.98

B)

$509.52

C)

$553.08

D)

$396.21

Use the real estate amortization table to find the monthly payment for the loan.

27)

What is the monthly payment on a 25–year loan of $98,600 if the annual interest rate is 51

2%?

27)

A)

$678.37

B)

$605.40

C)

$576.81

D)

$805.56

Using the Rule of 78, find the amount of unearned interest for the loan paid in full before the date of maturity. Round to

the nearest cent.

28)

Finance charge: $5518

Total number of payments: 50

Remaining number of payments, when paid in full: 8

28)

A)

$121.18

B)

$126.13

C)

$155.80

D)

$162.16

Solve the problem.

29)

The March 1 unpaid balance in an account was $179. On March 8, a payment of $25 was made. The

finance charge rate was 1.7% per month of the average daily balance. Find the new balance at the

end of March.

29)

A)

$156.63

B)

$155.70

C)

$181.14

D)

$156.71

Find the finance charge and total installment cost of the loan. Round to the nearest cent.

30)

Amount financed: $170.00

Down payment: $30.00

Cash price: $200.00

Number of payments: 12

Amount of payment: $18.21

30)

A)

$170.00; $248.52

B)

$30.00; $199.85

C)

$48.52; $248.52

D)

$85.00; $170.00

Find the total monthly payment including taxes and insurance for the loan. Round to the nearest cent.

31)

Amount of loan: $209,000

Interest rate: 51

2%

Term of loan: 30 years

Annual taxes: $2875

Annual insurance: $808

31)

A)

$1187.12

B)

$1590.18

C)

$1429.25

D)

$1494.04

32)

Amount of loan: $67,500

Interest rate: 7%

Term of loan: 15 years

Annual taxes: $1268

Annual insurance: $365

32)

A)

$761.81

B)

$606.83

C)

$659.21

D)

$742.91

Find the balance due on the maturity date of the note. Find the total amount of interest paid on the note. Use the United

States Rule.

33)

Principal: $8200

Interest: 10.5%

Time (days): 220

Partial payment: $3000 on day 150

33)

A)

$5713.71; $513.71

B)

$5102.08; $460.83

C)

$5306.17; $464.92

D)

$5672.24; $472.24

Solve the problem.

34)

The unpaid balance in an account at the beginning of December was $199. A payment of $55 was

made on December 24. The finance charge rate was 1.6% per month of the average daily balance.

Find the new balance at the end of December.

34)

A)

$173.57

B)

$145.60

C)

$146.88

D)

$146.96

35)

Julio buys a bike which has a cash price of $280. He puts $30 down, and agrees to pay 12 payments

of $24. After 8 payments he gets some birthday money and decides to pay off his loan. Find the

unearned interest and the amount to pay off the loan.

35)

A)

$4.87, $91.13

B)

$5.14, $90.86

C)

$7.28, $88.72

D)

$3.34, $92.66

Using the Rule of 78, find the amount of unearned interest for the loan paid in full before the date of maturity. Round to

the nearest cent.

36)

Finance charge: $393

Total number of payments: 28

Remaining number of payments, when paid in full: 3

36)

A)

$5.81

B)

$6.24

C)

$2.90

D)

$3.12

Find the unpaid balance at the end of the month for the account.

37)

Unpaid

Balance at Finance

Month Beginning Charge Purchases Returns Payment

Apr $624.80 $188.48 $31.23 $85.00

Finance rate is 1.2% on the unpaid balance.

37)

A)

$767.01

B)

$79.75

C)

$704.55

D)

$735.78

Find the annual percentage rate using the annual percentage rate table.

17

38)

Amount Financed: $940

Finance Charge: $149.27

Number of monthly payments: 30

38)

A)

12.50%

B)

11.75%

C)

12.00%

D)

11.50%

Solve the problem using the loan payoff table or an amortization table.

39)

A new fax machine cost Miller Ltd. $2164. They are to pay it off in 18 months at 8% interest. What

will each monthly payment be, and how much interest will they pay on the loan?

39)

A)

$127.98, $139.64

B)

$128.97, $157.46

C)

$98.85, $384.70

D)

$97.88, $402.16

Find the finance charge for the following revolving charge account. Assume that interest is calculated on the average

daily balance of the account.

40)

Average Daily Balance Monthly Interest Rate

$4970.10 1.1%

40)

A)

$546.71

B)

$49.70

C)

$59.64

D)

$54.67

Find the unpaid balance at the end of the month for the account.

41)

Unpaid

Balance at Finance

Month Beginning Charge Purchases Returns Payment

June $609.21 $152.42 $25.30 $205

Finance rate is 1.4% on the unpaid balance.

41)

A)

$565.16

B)

$539.86

C)

$531.33

D)

$536.99

Solve the problem.

42)

The finance charge for a $950 TV was $171 for a 12–month note with no down payment. Find the

amount of interest saved if the loan was paid in full at the end of 3 months.

42)

A)

$98.65

B)

$13.15

C)

$548.08

D)

$127.19

Solve the problem. Use the approximate APR formula to estimate the APR, and round rates to the nearest tenth of a

percent.

43)

Maria Perez bought a washer–dryer combination on sale for $450, charging it to her card and

agreeing to pay $40.51 per month for one year. Find the approximate annual percentage rate for

this loan.

43)

A)

16%

B)

14.8%

C)

14%

D)

15.8%

Solve the problem.

44)

The unpaid balance in an account on May 1 was $201. A purchase of $26 was made on May 11. A $

60 payment was made on May 18. The finance charge rate was 1.65% per month of the average

daily balance. Find the new balance at the end of May.

44)

A)

$168.65

B)

$170.16

C)

$143.12

D)

$203.19