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- Interest Rate/Loan

You have been approved for a $70,000 loan toward the purchase of a new home at 12%

interest. The mortgage is for 30 years. How much are the approximately annual payments

of the loan? Hint: Assume you pay yearly.

$2,613

$8,690

$5,740

None of the above

2. First Choice Bank pays 9% APR compounded quarterly on its business loans. National Emerald Bank pays 16% APR compounded daily. The EAR for First Choice and National Emerald Bank are:

9.31% and 17.35%, respectively

9% and 17.50%, respectively

9.31% and 17.50%, respectively

9% and 17.35%, respectively

3. Computer Parts, Inc. is considering an investment that will have cash flows of $8,000,

$7,000 and $4,000 for years 1 through 3. What is the approximate value of this investment today if the appropriate discount rate is 10% per year?

$24,250

$20,900

$16,060

None of the above

4. You deposited $3,000 in your bank account today. An increase in which of the following will increase the future value of your deposit assuming that all interest is reinvested? Assume the interest rate is a positive value. Select all

answers that apply:

interest rate

initial amount of your deposit

frequency of the interest payments

length of the investment period

5. If you borrow $50,000 today at 10% interest for eight years. How much of

your second payment will be applied towards the principal of the loan?

$5,000

$4,372

$4,809

can not be determined with the information given

6. Match the following terms with the examples as appropriate:

Matching:

Answer Potential Matches:

: Pure discount loan 1: a promise by the US government to repay a fixed amount at some time in the future.

: Amortized Loan 2: You obtained a 5-month commercial loan. This loan loan will allow you

: Interest-only Loan to paid $500 in interest for four months and a final payment of interest and

: Treasury Bill principal at the end of the fifth month.

3: You borrow $3,000 from your bank at 10% interest. You will make no payments for two months but will return the full amount plus interest at the end of three months.

4: You obtained a loan from your bank to buy a car. You will pay $300 per month to cover both interest and principal.

7. You are interested in saving to buy a new machine that costs $1,105. You can

deposit $250 in your bank today. If your bank pays 8% annual interest on its

accounts, how long will it take you to save for the new machine?

about 19 years

about 9 years

about 4.5 years

Can not be determined

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Interest , Rate , Apr , Loan , Amortized , Treasury , Discount

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