Simple Interest - lkueh
Finance Review Questions
1. You invest $15 000 at 3% per annum, simple interest. After 4 years, what is the amount in your account?
Answer: $16 800
2. You borrow $3000 for 1 year. The amount you repaid was $3090.00. What is the annual simple interest rate?
Answer: 3%
3. You deposit $12 500 into an account that earns 10% per year simple interest. How long will it take for the amount in the account to reach $16 250?
Answer: 3 years
4. You borrow $3500, which you plan to repay in 5 years. You are charged 5% per year, simple interest. How much interest must you pay?
Answer: 875
5. You deposit $1000 into an account that earns 10% per year, compounded semi-annually. After 3 years, what is the total amount in the account?
Answer: $1340.10
6. You deposit $800 into an account that earns 2% per year, compounded quarterly. After 5 years, how much interest have you earned?
Answer: $83.92
7. You apply for a $500 loan, which you plans to repay in 4 years. You are told by the loan officer that the amount payable when the loan is due is $738.73. What rate of interest, compounded semi-annually, are you being charged?
Answer: 10%
8. You deposit $20 into an account that earns 6% annual interest, compounded monthly. How long will it take to have $22.54 in the account?
Answer: 2 years.
9. You borrow $2000, and plan to repay the loan in 2 years, at which point you will owe $2345.78. What rate of interest are you charged, assuming it is compounded monthly?
Answer: 8%
10. What amount should be invested today so that there will be $5000 in an account in 4 years, if interest is earned at a rate of 5% per annum, compounded semi-annually?
Answer: $4103.73
11. You need $15 000 in 10 years to buy a car. Your investment earns interest at a rate of 16% per year, compounded quarterly. What is the value needed today to afford the car? What is the interest earned?
Answer: $3124.34, interest $11 875.66
12. You receive a financial gift from your grandparents which you invest at 12% annual interest, compounded annually. You are advised that the investment will be worth $12 500 in 8 years. How much was the gift?
Answer: $5048.54
13. In 2 years, an investment earning 7% interest per year, compounded daily will have a value of $1000. What was the initial investment?
Answer: $869.37
14. At the end of 6 months for 3 years, you deposit $2000 into an account that earns 7% per annum, compounded semi-annually. What is the amount of the annuity after the 3 years?
Answer: $13 100.30
15. You deposit 2 dollars every day for 5 years. Interest is earned at a rate of 15% per year, compounded daily. What is the amount of the annuity, and how much interest is earned?
Answer: $5434.48, interest earned was $1784.48
16. You decide to make regular deposits every 2 weeks into an account that earns 13% annual interest, compounded bi-weekly. You hope to have $59 218.03 at the end of 2 years. What is the amount of the regular payment you need to make?
Answer: $1000
17. At the end of every 6 months for 4 years, you deposit $7000 into an account that earns 6% per annum, compounded semi-annually. What is the amount of the annuity after the 4 years?
Answer: $62 246.35
18. You deposit $3500 every 3 months for 7 years. Interest is earned at a rate of 8% per year, compounded quarterly. What is the amount of the annuity, and how much interest is earned?
Answer: $129679.24, interest earned was $31 679.24
19. You are going to college this year, and you need to take out $3500 every 3 months. Your college fund is in an account that pays 8% interest, compounded quarterly. What is the amount of money that you need in the account now to pay for your expenses for 3 years at college?
Answer: $37 013.69
20. You borrow $29 618.36 to buy a car. You want to pay it off in 10 years. If the bank is charging you 6% interest, compounded monthly, what is the regular payment every month?
Answer: $328.82
21. You borrow $65 445.03 to buy an RV. The loan was negotiated at 5.7% interest, compounded bi-weekly. You would like to pay off the loan in 15 years. How much do you need to pay down every 2 weeks?
Answer: $249.82
22. For university, you need about $7000 to cover tuition and books every year for 4 years. (Not including living in residence!) How much do you have to invest now to fund your university education, if your investment account pays 7% interest, compounded annually?
Answer: $23 710.48
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