• Interest Rate/Loan

Interest Rate/Loan - 30 Jan, 2012

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.                    




        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?               





        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?             




        can not be determined with the information given              


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



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                 

Category : Financial Management

Search Keywords :
Interest , Rate , Apr , Loan , Amortized , Treasury , Discount 

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Answer  - 30 Jan, 2012
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