Deck 3: Mathematics of Finance

Question 1

Use the formula A = P(1 + rt) to find the indicated quantity.
A = $16,400; r = 10%; 90 days.Find P.

A)$16,400
B)$400.00
C)$16,000
D)$16,810

Answer 1

$16,000

Question 2

Provide an appropriate response.
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 2

5.2%

Question 3

Use I = Prt for simple interest to find the indicated quantity.
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 3

$7069.92

Question 4

Use the formula A = P(1 + rt) to find the indicated quantity.
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

Question 5

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.
11.6% to decimal

A)11.6
B)116
C)0.116
D)0.00116

Question 6

Solve the problem. Round dollar amounts to the nearest cent. Use 360 days.
Polson Associates bought a new computer system. To pay for the system, they borrowed $41,950 from the bank at interest for 130 days. Find the simple

A)$3670.63
B)$1315.31
C)$1325.50
D)$1307.35

Question 7

Solve the problem. Assume that simple interest is being calculated in each case. Round your answer to the nearest cent.
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

Question 8

Solve the problem. Round dollar amounts to the nearest cent. Use 360 days.
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

Question 9

Provide an appropriate response.
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.)

Question 10

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.
0.05% to decimal

A)0.5
B)5.0
C)0.0005
D)0.05

Question 11

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.
0.05 to percent

A)0.0005%
B)50%
C)0.05%
D)5%

Question 12

Find the amount that will be accumulated in the account under the given conditions.
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

Question 13

Use I = Prt for simple interest to find the indicated quantity.
P = $13,500; t = 4 months; I = $517.50.Find r.

A)7.7%
B)11.5%
C)11.7%
D)3.8%

Question 14

Provide an appropriate response.
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.

Question 15

Use I = Prt for simple interest to find the indicated quantity.
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%

Question 16

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.
0.25 to percent

A)0.0025%
B)25%
C)2.5%
D)2.25%

Question 17

Solve the problem. Round dollar amounts to the nearest cent. Use 360 days.
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

Question 18

Provide an appropriate response.
Find the amount due on a loan of $8,500 at 7.5% simple interest at the end of 4 years.

Question 19

Use I = Prt for simple interest to find the indicated quantity.
I = $750; r = 6%; t = 6 months.Find P.

A)$22.50
B)$25,750
C)$24,250
D)$25,000

Question 20

Use the formula A = P(1 + rt) to find the indicated quantity.
P = $7996; r = 6%; t = 10 months.Find A.

A)$8475.76
B)$8395.80
C)$399.80
D)$6663.33

Question 21

Find the compound interest earned. Round to the nearest cent.
$600 at 5% compounded quarterly for years

A)$204.06
B)$95.82
C)$95.45
D)$46.43

Question 22

Provide an appropriate response.
An investment company pays 7% compounded quarterly.What is the effective rate? (Compute the answer to two decimal places).

Question 23

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.
Month: April (30 days)Previous month's balance: $960 Interest rate: 21%

A)$14.93
B)$14.07
C)$11.61
D)$17.50

Question 24

Provide an appropriate response.
How much should you invest now at 6% compounded semiannually to have $8,500 to buy a car in 2.5 years?

Question 25

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.
Month: February (28 days)Previous month's balance: $1240 Interest rate: 22%

A)$15.96
B)$19.71
C)$18.22
D)$8.31

Question 26

Find the compound amount for the deposit. Round to the nearest cent.
$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

Question 27

Provide an appropriate response.
What amount will be in an account after 1.5 years if $4,000 is invested at 5% compounded semiannually?

Question 28

Find the compound amount for the deposit. Round to the nearest cent.
$1100 at 3% compounded quarterly for 2 years

A)$1116.56
B)$1167.76
C)$1166.99
D)$1166.00

Question 29

Find the compound amount for the deposit. Round to the nearest cent.
$600 at 8% compounded quarterly for 5 years

A)$840.00
B)$881.60
C)$662.45
D)$891.57

Question 30

Find the compound interest earned. Round to the nearest cent.
$14,000 at 5% compounded annually for 3 years

A)$2100.00
B)$1435.00
C)$701.50
D)$2206.75

Question 31

Solve the problem.
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%

Question 32

Solve the problem. Assume that the minimum payment on a credit card is the greater of $27 or 3% of the unpaid balance.
Find the minimum payment on an unpaid balance of $1584.40.

A)$52.53
B)$47.53
C)$27.00
D)$475.32

Question 33

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.
Month: May (31 days)Previous month's balance: $960

A)$7.88
B)$12.35
C)$11.31
D)$8.76

Question 34

Solve the problem. Assume that the minimum payment on a credit card is the greater of $27 or 3% of the unpaid balance.
Find the minimum payment on an unpaid balance of $787.71.

A)$28.63
B)$236.31
C)$23.63
D)$27.00

Question 35

Provide an appropriate response.
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.

Question 36

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.
Month: July (31 days)

A)$10.56
B)$12.40
C)$10.66
D)$10.92

Question 37

Find the compound interest earned. Round to the nearest cent.
$700 at 8% compounded semiannually for 4 years

A)$252.34
B)$595.65
C)$258.00
D)$118.90

Question 38

Solve the problem.
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

Question 39

Solve the problem. Assume that the minimum payment on a credit card is the greater of $27 or 3% of the unpaid balance.
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

Question 40

What is the annual percentage yield (APY) for money invested at the given annual rate? Round results to the nearest hundredth of a percent.
5% compounded semiannually

A)5.06%
B)5.13%
C)5.00%
D)5.09%

Question 41

Use the future value formula to find the indicated value. Round to three decimal places.
n = 10; i = 0.02; PMT = $1; FV = ?

A)$10.95
B)$60.95
C)$12.169
D)$9.755

Question 42

Solve the problem. Round to the nearest cent as needed.
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

Question 43

Find the future value of the ordinary annuity. Interest is compounded annually, unless otherwise indicated.
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

Question 44

Find the periodic payment that will render the sum.
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

Question 45

Solve the problem. Round to the nearest cent as needed.
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%

Question 46

Solve the problem. Round to the nearest cent as needed.
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

Question 47

Solve the problem.
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%

Question 48

Find i (the rate per period) and n (the number of periods) for the annuity.
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

Question 49

Solve the problem. Round to the nearest cent as needed.
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

Question 50

Solve the problem. Round to the nearest cent as needed.
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

Question 51

Solve the problem. Round to the nearest cent as needed.
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

Question 52

Solve the problem. Round to the nearest cent as needed.
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

Question 53

What is the annual percentage yield (APY) for money invested at the given annual rate? Round results to the nearest hundredth of a percent.
3.5% compounded continuously.

A)3.50%
B)3.53%
C)3.55%
D)3.56%

Question 54

How many months will it take until an account will have $3,500 if $2,500 is invested now at 5% compounded monthly?

Question 55

What is the annual percentage yield (APY) for money invested at the given annual rate? Round results to the nearest hundredth of a percent.
6% compounded quarterly

A)6.14%
B)6.09%
C)6.18%
D)6.00%

Question 56

Solve the problem. Round to the nearest cent as needed.
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

Question 57

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.

Question 58

Use the future value formula to find the indicated value. Round to three decimal places.
n = 13; i = 0.04; PMT = $1000; FV = ?

A)$16,627.838
B)$18,292.371
C)$15,026.247
D)$41,627.144

Question 59

Find i (the rate per period) and n (the number of periods) for the annuity.
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

Question 60

Solve the problem. Round to the nearest cent as needed.
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

Question 61

Solve the problem.
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

Question 62

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?

Question 63

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?

Question 64

Solve the problem.
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

Question 65

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

Question 66

Solve for the missing value. Round to four decimal places.
n = 30; i = 0.03; PMT = $100; PV = ?

A)$1960.0441
B)$4706.6287
C)$1918.1585
D)$2000.0441

Question 67

Find i (the rate per period) and n (the number of periods) for the loan at the given annual rate.
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

Question 68

Solve for the missing value. Round to four decimal places.
n = 24; i = 0.09; PMT = $1; PV = ?

A)$12.5156
B)$9.5802
C)$9.7066
D)$9.8226

Question 69

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.)

Question 70

Find i (the rate per period) and n (the number of periods) for the loan at the given annual rate.
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

Question 71

Find the rate of interest required to achieve the conditions set forth.
A = $32,000 P = $8,000
T = 20 years compounded annually

A)7.1773%
B)8%
C)3.5265%
D)5.6467%

Question 72

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

Question 73

Find the payment necessary to amortize the loan.
$12,800; 12% compounded monthly; 48 monthly payments

A)$1542.69
B)$337.31
C)$331.71
D)$337.07

Question 74

Find the rate of interest required to achieve the conditions set forth.
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%

Question 75

Find the rate of interest required to achieve the conditions set forth.
A = $32,000 P = $8,000
T = 20 years compounded quarterly

A)3.4959%
B)3.5489%
C)6.9919%
D)5.5310%

Question 76

Find the present value of the ordinary annuity.
Payments of $68 made quarterly for 10 years at 8% compounded quarterly

A)$1872.41
B)$1860.17
C)$1829.38
D)$667.63

Question 77

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?

Question 78

Solve the problem.
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

Question 79

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

Question 80

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?