Math 1332 Test 5 Review

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1 Name Find the simple interest. The rate is an annual rate unless otherwise noted. Assume 365 days in a year and 30 days per month. 1) $1660 at 6% for 4 months Find the future value of the deposit if the account pays simple interest. 2) $2000 at 2.4% for 4 years Assume that simple interest is being calculated in each case. Round the answer to the nearest cent unless otherwise indicated. 3) Andy Jones opened a security service company. To pay for startup costs, Andy Jones borrowed $40,000 from a bank at 5% for 1 year. Find the interest. 4) Martin takes out a simple interest loan at 4 %. After 10 months the amount of interest on the loan is $ What was the amount of the loan? Round to the nearest dollar. Use the compound interest formula to compute the future value of the investment. 5) $1300 at 2% compounded quarterly for 6 years 6) $5000 at 7.25% compounded continuously for 7 years 7) $1100 at 1% compounded monthly for 12 months Find the compound interest earned by the deposit. Round to the nearest cent. 8) $4100 at 2.9% compounded semiannually for 5 years 9) $4000 at 1% compounded quarterly for year 10) $7824 at 4% compounded continuously for 4 years Find the present value for the given future amount. Round to the nearest cent. 11) A = $4900, 8 years r = 8% compounded quarterly 12) A = $4000, 12 years r = 4% compounded semiannually Find the effective annual interest rate for the given nominal annual interest rate. Round your answers to the nearest 0.01%. 13) 3% compounded quarterly 14) 4.3% compounded daily (assume 365 days per year) 15) The average cost of a 4-year college education is projected to be $120,000 in 15 years. How much money should be invested now at 7.5%, compounded quarterly, to provide $120,000 in 15 years? 1

2 16) Joe is buying some kitchen equipment for his new apartment. The total cost is $2300 and he places a down payment of $230. There is add-on interest of 12%. What is the total amount he will be financing? 17) Barb is buying a new car for $13,000. Her old car has a trade-in Value of $2500. The dealer informs her that the financing charge is 7% add-on interest. If she wishes to take 2 years to pay off the car, what will be the total amount to be repaid? 18) Bill makes a $100 per month payment for years to pay off a $2500 loan. What was the add-on interest rate? Round to the nearest cent. 19) On January 1, the unpaid balance in an account was $195. A payment of $50 was made on January 25. The finance charge rate was 1.2% per month of the average daily balance. Find the finance charge for the month of January. 20) On April 1, the unpaid balance in an account was $218. A payment of $30 was made on April 11. On April 21, a $40 purchase was made. The finance charge rate was 1.15% per month of the average daily balance. Find the new balance at the end of April. 21) On the September 1 billing date, Martin had a balance due of $ on his credit card. The transactions during the following month were: September 3 Payment $93.30 September 9 Charge: airline ticket $ September 22 Charge: shoes $75.97 September 29 Charge: garden tiller $ The interest rate on the card is 1.4% per month. Using the average daily balance method, find the finance charge on October 1 (September has 30 days). 22) On the October 15 billing date, Jacob had a balance due of $ on his credit card. The transactions during the following month were: October 17 Payment $21.94 October 30 Charge: groceries $60.23 November 10 Charge: freezer $ The interest rate on the card is 1.2% per month. Using the average daily balance method, find the balance due on November 15 (October has 31 days). Find the APR (true annual interest rate), to the nearest half percent, for the following loan. 23) Amount Financed = $3400 Finance Charge = $470 Number of Monthly Payments = 36 Find the APR (true annual interest rate), to the nearest half percent, for the following. 24) A college student purchased a used car for $4000. He paid 15% down and then paid 18 monthly payments of $ Determine the APR of the loan to the nearest one-half of a percent. 25) A student has a total of $2500 in student loans that will be paid with a 48-month installment loan with monthly payments of $ Determine the APR of the loan to the nearest one-half of a percent. 2

3 26) An item is purchased for $2500 with a down payment of $500. There is a finance charge of $150. Find the monthly payment if 20 payments are made. Use the Annual Percentage Rate Table if necessary. 27) Find the APR to the nearest half percent, for the following data. Purchase Down Payment Add-on # of Payments Price Interest Rate $5000 $500 5% 24 28) Find the APR to the nearest half percent, for the following data. Purchase Down Payment Add-on # of Payments Price Interest Rate $3500 $500 7% 18 29) The cash price of a fitness system is $ The customer paid $115 as a down payment. The remainder will be paid in 36 monthly installments of $19.16 each. Find the amount of the finance charge. Use an annual percentage rate table if necessary. 30) A retired couple buys a new recreational vehicle (RV) for $54,000. They make a down payment of $13,000 and finance the balance at 9.0% APR over 60 months. Before making the 12th payment, the couple decides to pay the remaining balance on the loan. How much interest will the couple save (use the actuarial method)? For the remaining problems, if you need to find the monthly payment amount for an amortized loan, use the Finance APP on your calculator. Round your answer to the nearest cent. 31) Find the monthly payment needed to amortize principal and interest for the following fixed-rate mortgage. Mortgage amount: $135,200 Term of mortgage: 30 years Interest rate: 9.5% 32) Find the total monthly payment, including taxes and insurance, on the following fixed-rate mortgage. Amount of loan: $76,000 Interest rate: 11% Term of loan: 20 years Annual taxes: $1404 Annual insurance: $337 33) Find the total monthly payment, including taxes and insurance, on the following fixed-rate mortgage. Amount of loan: $105,250 Interest rate: 10% Term of loan: 25 years Annual taxes: $3001 Annual insurance: $466 34) The monthly payment on a(n) $75,000 loan at 12% annual interest is $ How much of the first monthly payment will go toward the principal? 3

4 35) Complete the first month of the amortization schedule for the following fixed rate mortgage: Mortgage: $78,000 Interest rate: 8.5% Term of loan: 15 years Amortization Schedule Payment Total Interest Principal Balance of Number Payment Payment Payment Principal 1 $ (a) (b) (c) 36) By completing the first two months of the amortization schedule for the following fixed rate mortgage, determine the balance of principal at the end of the second month. Mortgage: $153,800 Interest rate: 9.5% Term of loan: 25 years Amortization Schedule Payment Total Interest Principal Balance of Number Payment Payment Payment Principal 1 2 If necessary, refer to the table below. 37) In order to purchase a home, a family borrows $65,000 at an annual interest rate of 11%, to be paid back over a 30-year period in equal monthly payments. How much interest will they pay over the 30-year period? Round to the nearest dollar. 38) In order to purchase a home, a family borrows $140,000 to be amortized at 9% interest. How much more interest will be paid in total if the term of the loan is 25 years than if it is 10 years? 4

5 Answer Key Testname: 1332 TEST 5 REVIEW 1) $ ) $ ) $ ) $2428 5) $ ) $ ) $ ) $ ) $ ) $ ) $ ) $ ) 3.03% 14) 4.39% 15) $39, ) $ ) $11, ) 8% 19) $ ) $ ) $ ) $ ) 8.5% 24) 11.5% 25) 8.5% 26) $ ) 9.5% 28) 13.0% 29) $ ) $ ) $ ) $ ) $ ) $ ) (a) $ (b) $ (c) $77, ) $153, ) $157,844 38) $139,

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