Investment Math exam PDF

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Investment Math...

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Simple interest and annuity and change debt 1) Interest is the amount of money borrowed 2) The time of a loan could be expressed in months, years, or days. 3) The amount a bank charges for the use of money is called interest. 4) Simple interest loans are usually more than one year. 5) Interest = principal × rate. 6) 18 months is the same as 1.5 years. 7) exact interest method represents time as the exact number of days divided by 365. 8) The time for a loan made on July 10 and repaid on March 15 is 119 days (no leap year). 9) Ordinary interest results in a slightly higher rate of interest than exact interest. 10) Principal is equal to rate divided by interest times time. 11) Rate is equal to interest divided by the principal times time 12) To convert time in days, it is necessary to multiply the time in years times 360 or 365. 13) In the U.S. Rule, the first step is to calculate interest on the total life of the loan. 14) In the U.S. Rule, the partial payment first covers the interest and the remainder reduces the principal. 15) Interest is the cost of borrowing. Exercises: 1- Interest is equal to: A. Principal × rate divided by time B. Principal divided by rate × time C. Principal × time D. Principal × rate × time 2- The amount charged for the use of a bank's money is called: A) Principal B) Interest C) Rate D) Time 3- Simple interest usually represents a loan of: A. One month or less B. One year or less C. Two years or less D. Six months or less 4- A note dated August 18 and due on March 9 (no leap year) runs for exactly: A) 200 days B) 227 days C) 221 days D) 203 days 5- A $40,000 loan at 4% dated June 10 is due to be paid on October 11. The amount of interest is (assume ordinary interest): A) $544.00 B) $1,600.00 C) $546.67 D) $547.20 6- Interest on $5,255 at 12% for 30 days (use ordinary interest) is: A) $52.55 B) $5,307.55 C) $5.26 D) $5,260.26 7- Given interest of $11,900 at 6% for 50 days (ordinary interest), one can calculate the principal as: A) $27,168.95 B) $1,447,833.33 C) $1,428,000.00 D) $27,546.30

8- A debt of $200 is due in six months. If the rate of interest is 15% what is the value of the debt if it is paid A. Two months hence? B. Six months hence? C. Nine months hence? 9- A man owes (1) $ 100 , due in two months , and (2)$400, due in eight months. His creditor has agreed to settle the debts by two equal payment in four months and ten months, respectively. Find the size of each payment if the rate of interest is 6% and the comparison date is four months hence . What is the size of each equal payment if the comparison date is set ten months hence?

Amount of An Annuity simple interest 𝒕𝒐𝒕𝒂𝒍 𝑨𝒎𝒐𝒖𝒏𝒕 = 𝑷𝑴𝑻 × 𝒏 + 𝑷𝑴𝑻 × 𝑹 × Where: PMT : equal payment (annuity) n : number of annuities R : simple interest rate T1: time for first annuity = number of months from the first deposed date until the amount date Tn : time for last annuity = number of months from the last deposed date until the amount date total principals = 𝑷𝑴𝑻 × 𝒏

𝒏 𝒕 𝟏 + 𝒕𝒏 ) ( 𝟏𝟐 𝟐

𝒏 𝒕𝟏 +𝒕𝒏 ) 𝟏𝟐

total interest = 𝑷𝑴𝑻 × 𝑹 × 𝟐 ( 𝒏 𝒕𝟏 +𝒕𝒏 ) 𝟐 𝟏𝟐

total terms = (

Exercises: 1- A man deposits $500 at the end of each month for 18 months in a bank that pays 12% simple interest. How much will he have to his credit just after the last deposit it made? 2- A person puts $200 each two months for 2 years into an account paying 12% simple interest. Find the amount at the time of last payment. 3- Find the amount of an annuity of $500 per month for 2 years at simple interest rate 12%. 4- An investment of $200 is made at the beginning of each month for 10 months. If simple interest rate 12% how much will the investment be worth at the end of 10 months. 5- Ana deposits $450 in a bank at the end of each month for 2years and 9 months. If the money earns interest at 12% simple interest, how much money does she have in her account at the end of the period? Find total terms, total principals, total interest...