math semester 2

Tiffany has taken out a loan with a stated interest rate of 8.145%. How much greater will Tiffany’s effective interest rate be if the interest is compounded weekly than if it is compounded semiannually?a. 0.3340 percentage pointsb. 0.1659 percentage pointsc. 0.1681 percentage pointsd. 0.1234 percentage points C
Which factor or factors listed below are external influences on a loan’s interest rate?I. the borrower’s credit historyII. the length of the loanIII. the federal funds ratea. I and IIb. I and IIIc. II and IIId. III only D
Andrew is choosing between four loans. Loan P has a nominal rate of 10.393%, compounded daily. Loan Q has a nominal rate of 10.516%, compounded weekly. Loan R has a nominal rate of 10.676%, compounded monthly. Loan S has a nominal rate of 10.755%, compounded annually. Which loan will give Andrew the best effective interest rate?a. loan Pb. loan Qc. loan Rd. loan S D
Wyatt is paying back a loan with a nominal interest rate of 13.62%. If the interest is compounded quarterly, how much greater is Wyatt’s effective interest rate than his nominal interest rate?a. 0.96 percentage pointsb. 0.40 percentage pointsc. 0.25 percentage pointsd. 0.71 percentage points D
Mike is looking for a loan. He is willing to pay no more than an effective rate of 8.000% annually. Which, if any, of the following loans meet Mike’s criteria?Loan X: 7.815% nominal rate, compounded semiannuallyLoan Y: 7.724% nominal rate, compounded monthlyLoan Z: 7.698% nominal rate, compounded weeklya. Y onlyb. X and Zc. Y and Zd. None of these meet Mike’s criteria. B
When calculating the effective rate of a loan, which statement or statements must be true if n is equal to 1?I. The nominal rate equals the effective rate.II. The length of the loan is exactly one year.III. The interest is compounded annually.a. I and IIIb. II and IIIc. I onlyd. III only A
Orlando has a loan with an effective interest rate of 7.918%, compounded annually. Which of the following must be true?I. In the effective rate formula, n is equal to one.II. The nominal rate is 7.918%.III. The Federal Funds Rate is static.a. I and IIb. II onlyc. III onlyd. I, II, and III A
Why do interest rates on loans tend to be higher in a strong economy than in a weak one?a. Credit markets increase in a strong economy, and with increased demand come increased prices.b. A strong economy encourages borrowers to take out very long-term loans, which have higher interest rates.c. Credit is plentiful in a strong economy, so it is harder to build up the good credit rating necessary for a low interest rate.d. People in a strong economy have more money, so they can afford more expensive loans. A
Dave is considering two loans. Loan U has a nominal interest rate of 9.97%, and Loan V has a nominal interest rate of 10.16%. If Loan U is compounded daily and Loan V is compounded quarterly, which loan will have the lower effective interest rate, and how much lower will it be?a. Loan V’s effective rate will be 0.3324 percentage points lower than Loan U’s.b. Loan V’s effective rate will be 0.1187 percentage points lower than Loan U’s.c. Loan U’s effective rate will be 0.5124 percentage points lower than Loan V’s.d. Loan U’s effective rate will be 0.0713 percentage points lower than Loan V’s. D
The nominal rate on Sarah’s loan is 7.250%. If the interest is compounded monthly, what rate of interest is Sarah actually paying?a. 7.250%b. 7.496%c. 7.510%d. 8.700% B
When calculating a loan’s effective rate, if the interest compounds every two months, what value of n do you plug into your equation?a. 2b. 0.167c. 6d. 60 C
Thomas has a loan with a nominal interest rate of 6.4624% and an effective interest rate of 6.4715%. Which of the following must be true?I. The loan has a duration greater than one year.II. The interest on Thomas’s loan is compounded more than once yearly.III. The economy was strong when Thomas took out the loan.a. I and IIb. II onlyc. I and IIId. III only B
RJ has two loans. Loan H has a nominal rate of 5.68%, compounded daily. Loan I has a nominal rate of 6.33%, compounded monthly. Which loan’s effective rate had the greater increase, relative to its nominal rate, and how much greater is its increase than that of the other loan?a. Loan I’s increase was 0.03 percentage points greater than Loan H’s.b. Loan I’s increase was 0.68 percentage points greater than Loan H’s.c. Loan H’s increase was 0.16 percentage points greater than Loan I’s.d. Loan H’s increase was 0.49 percentage points greater than Loan I’s. A
Craig is considering four loans. Loan L has a nominal rate of 8.254%, compounded daily. Loan M has a nominal rate of 8.474%, compounded weekly. Loan N has a nominal rate of 8.533%, compounded monthly. Loan O has a nominal rate of 8.604%, compounded yearly. Which of these loans will offer Craig the best effective interest rate?a. loan Lb. loan Mc. loan Nd. loan O A
When calculating the effective rate of a loan, which statement or statements must be true if n is greater than 1?I. The length of the loan is greater than a single year.II. The effective rate will exceed the nominal rate.III. The interest will be compounded monthly.a. II onlyb. II and IIIc. I and IIId. I, II, and III A
Anna’s bank gives her a loan with a stated interest rate of 10.22%. How much greater will Anna’s effective interest rate be if the interest is compounded daily, rather than compounded monthly?a. 0.5389 percentage pointsb. 0.1373 percentage pointsc. 0.4926 percentage pointsd. 0.0463 percentage points D
When calculating a loan’s effective interest rate, if the nominal rate is 8.5%, what value of i do you plug into your equation?a. 8.5b. 0.85c. 0.085d. 1.85 C
Say you are considering two loans. Loan F has a nominal interest rate of 5.66%, compounded monthly. Loan G has a rate of 6.02%, compounded semiannually. Which loan will give the lower effective interest rate, and how much lower will it be?a. Loan G’s effective rate will be 0.091 percentage points lower than Loan F’s.b. Loan G’s effective rate will be 0.058 percentage points lower than Loan F’s.c. Loan F’s effective rate will be 0.302 percentage points lower than Loan G’s.d. Loan F’s effective rate will be 0.149 percentage points lower than Loan G’s. C
Which factor or factors listed below are internal influences on a loan’s interest rate?I. current and prospective inflationII. collateral offered by the borrowerIII. the strength of the economya. I onlyb. I and IIIc. II onlyd. II and III C
What effect does inflation have on interest rates, and why?a. Inflation decreases interest rates, because it causes the principal amount to rise.b. Inflation decreases interest rates, because borrowers in an inflationary economy cannot afford higher interest rates.c. Inflation increases interest rates, because the money being lent out is more valuable after inflation.d. Inflation increases interest rates, because lenders must charge more to gain a benefit on devalued money. D
The principal on Jan’s loan was $4,700, but by the time she had paid it off after four years, the interest and principal totaled $5,388. If Jan made regular quarterly payments of $355 until the loan was paid off, how much did Jan pay for service charges?a. $292b. $688c. $980d. $18 A
Brian took eight years to pay off his $71,900 loan. The loan had an interest rate of 8.16%, compounded quarterly. If Brian paid quarterly and made the same payment every time, how much was each payment that he made?a. $2,342.66b. $3,081.54c. $1,022.28d. $1,466.76 B
Kevin has just finished paying off his loan. He was assessed a service charge of $422. He paid off the principal and the interest by making weekly payments of $36.13 for four years. If the principal was $7,150, how much did Kevin pay in finance charges, to the nearest dollar?a. $498b. $365c. $422d. $787 D
Niki makes the same payment every two months to pay off his $61,600 loan. The loan has an interest rate of 9.84%, compounded every two months. If Niki pays off his loan after exactly eleven years, how much interest will he have paid in total? Round all dollar values to the nearest cent.a. $39,695.48b. $10,294.26c. $3,126.29d. $39,467.12 A
Maria is going to take out a loan with a principal of $19,700. She has narrowed down her options to two banks. Bank M charges an interest rate of 7.1%, compounded monthly, and requires that the loan be paid off in five years. Bank N charges an interest rate of 7.8%, compounded monthly, and requires that the loan be paid off in four years. How would you recommend that Maria choose her loan?a. Bank M offers a better loan in every regard, so Maria should choose it over Bank N’s.b. Maria should choose Bank M’s loan if she cares more about lower monthly payments, and she should choose Bank N’s loan if she cares more about the lowest lifetime cost.c. Maria should choose Bank N’s loan if she cares more about lower monthly payments, and she should choose Bank M’s loan if she cares more about the lowest lifetime cost.d. Bank N offers a better loan in every regard, so Maria should choose it over Bank M’s. B
Kay has decided to take out a $23,100 loan, and she wants to pay it back in quarterly installments. She has narrowed her options down to two banks. Bank V offers a six-year loan with an interest rate of 4.6%, compounded quarterly, and has a service charge of $822.45. Bank W offers an eight-year loan with an interest rate of 3.9%, compounded quarterly, and a service charge of $722.25. Which loan will have the greater total finance charge, and how much greater will it be? Round all dollar values to the nearest cent.a. Loan W’s finance charge will be $335.96 greater than Loan V’s.b. Loan W’s finance charge will be $436.16 greater than Loan V’s.c. Loan V’s finance charge will be $263.10 greater than Loan W’s.d. Loan V’s finance charge will be $100.20 greater than Loan W’s. A
Paul has an eight-year loan with a principal of $26,900. The loan has an interest rate of 8.18%, compounded quarterly. If Paul pays $1,527 in service charges and makes quarterly payments on his loan, what will his total finance charge be when the loan is repaid? Round all dollar values to the nearest cent.a. $10,588.28b. $11,546.36c. $11,370.04d. $1,527.00 B
Carlos took seven years to pay off his loan by making identical quarterly payments. The loan had a principal of $22,375 and 5.49% interest, compounded quarterly. Carlos paid a total of $28,821.67. How much did Carlos pay in service charges? Round all dollar values to the nearest cent.a. $1,721.31b. $4,725.36c. $1,670.98d. $6,446.67 A
You have just finished paying off your $35,125 loan, a feat which took ten years of quarterly payments. The loan had an interest rate of 7.44%, compounded quarterly. If you also paid $5,180.70 in service charges, what percentage of the total cost was made up by your finance charges? Round all dollar values to the nearest cent.a. 25.69%b. 36.47%c. 57.41%d. 27.10% B
Jerry’s loan had a principal of $22,000. He made quarterly payments of $640 for nine years until the loan was paid in full. How much did Jerry pay in interest?a. $3,120b. $1,040c. $2,010d. $5,760 B
Dana just finished paying off the $15,400 loan she took out four years ago. The loan had 6.68% interest, compounded monthly. If Dana paid a total of $18,321.60, how much did she pay in service charges?a. $730.08b. $366.49c. $1,028.72d. $266.76 A
Chelsea made monthly payments for four years before her $13,440 loan was paid off. The loan had an interest rate of 5.86%, compounded monthly. Chelsea paid $156.60 in service charges. To the nearest tenth, what percentage of the total cost of the loan did her finance charges comprise? Round all dollar values to the nearest cent.a. 13.6%b. 10.9%c. 9.4%d. 11.9% D
Dahlia is trying to decide which bank she should use for a loan she wants to take out. In either case, the principal of the loan will be $19,450, and Dahlia will make monthly payments. Bank P offers a nine-year loan with an interest rate of 5.8%, compounded monthly, and assesses a service charge of $925.00. Bank Q offers a ten-year loan with an interest rate of 5.5%, compounded monthly, and assesses a service charge of $690.85. Which loan will have the greater total finance charge, and how much greater will it be? Round all dollar values to the nearest cent.a. Loan Q’s finance charge will be $83.73 greater than Loan P’s.b. Loan Q’s finance charge will be $317.88 greater than Loan P’s.c. Loan P’s finance charge will be $20.51 greater than Loan Q’s.d. Loan P’s finance charge will be $234.15 greater than Loan Q’s. A
Colin took out a loan with a principal of $32,800. After five years, the interest and principal totaled $48,872. If Colin made monthly payments of $816 for five years until the loan was paid off, how much did Colin pay in service charges?a. $16,072b. $88c. $16,160d. $163 B
Travis took out a six-year loan with a principal of $15,000. He made monthly payments of $225 for the entire period, at which point the loan was paid off. How much did Travis pay in interest?a. $1,200b. $1,350c. $800d. $0 A
Which of these best fits the definition of interest, as it applies to finance?a. Interest is the money earned by investing.b. Interest is the cost of borrowing money.c. Interest is the cost of investing poorly.d. Interest is the portion of a loan which must be repaid every year. B
Why is the interest rate of a loan one of the most important things to consider when shopping around for loans?a. The interest rate should be ignored, because there’s nothing a consumer can do to change it. b. The interest rate is essentially how long you have to pay off your loan, and the shorter the better.c. The interest rate can drastically change the total amount paid to the lender, in the case of mortgages, up to thousands of dollars. d. The interest rate does not change, even between banks, so choosing the right time to borrow is essential. C
Tamora just made the last of her monthly payments on her loan. She had been making these payments for the past nine years. The loan had a principal of $10,675 and an interest rate of 4.75%, compounded monthly. In addition, Tamora paid $939.25 in service charges. What was Tamora’s total finance charge? Round all dollar values to the nearest cent.a. $939.25b. $11,614.25c. $3,403.53d. $2,464.28 C
Yvette is considering taking out a loan with a principal of $16,200 from one of two banks. Bank F charges an interest rate of 5.7%, compounded monthly, and requires that the loan be paid off in eight years. Bank G charges an interest rate of 6.2%, compounded monthly, and requires that the loan be paid off in seven years. How would you recommend that Yvette choose her loan?a. Bank F offers a better loan in every regard, so Yvette should choose it over Bank G’s.b. Yvette should choose Bank F’s loan if she cares more about lower monthly payments, and she should choose Bank G’s loan if she cares more about the lowest lifetime cost.c. Yvette should choose Bank G’s loan if she cares more about lower monthly payments, and she should choose Bank F’s loan if she cares more about the lowest lifetime cost.d. Bank G offers a better loan in every regard, so Yvette should choose it over Bank F’s. B
Sam is paying off his eight-year, $15,360 loan in semiannual installments. The loan has an interest rate of 9.58%, compounded semiannually, and a service charge of $1,294.64. Once the loan has been fully paid off, what percentage of the total finance charge will the service charge be? Round all dollar values to the nearest cent.a. 5.48%b. 8.43%c. 18.55%d. 15.65% D
In calculating the monthly payment for a loan with an 8.5% interest rate, what value should be used for i, the interest rate per period, as it appears in the following formula?a. 8.5b. 0.71c. 0.085d. 0.0071 D
Determine the finance charge on a $6,500 loan with an interest rate of 9.5% compounded monthly over 36 months.a. $27.65b. $208.21c. $995.56d. $7,495.56 C
Determine the monthly payment of a loan for $3,000 at 7.5% interest compounded monthly for 36 months.a. $93.32b. $95.40c. $211.33d. $253.60 A
Rachel took out a personal loan for $4,500 with a monthly payment of $173.06 for 36 months. Determine the finance charge on Rachel’s loan if she takes all 36 months to pay it off.a. $48.06b. $1,730.16c. $4,500.00d. $6,230.16 B
Ed needs to take out a loan for $7,000 to purchase a car. His bank has offered him a loan at 10.0% interest for 36 months or 10.5% interest for 24 months. Ed’s goal is to save as much money as possible by the time he pays off the loan. Which of the following statements best describes what Ed should be thinking?a. Since the monthly payment for the 36 month loan is lower, this loan will save more.b. Since the monthly payment for the 24 month loan is lower, this loan will save more.c. Since the finance charge for the 36 month loan is lower, this loan will save more.d. Since the finance charge for the 24 month loan is lower, this loan will save more. D
John is planning to take out a personal loan for $4,500 to buy a car. He would like to keep his monthly payments at or below $150.00 and pay the loan off in three years. Which of the following is the greatest interest rate John can accept and still meet his criteria?a. 10.75% compounded monthlyb. 11.50% compounded monthlyc. 12.25% compounded monthlyd. 13.00% compounded monthly C
Judy needs to take out a personal loan for $2,500 for tuition assistance. Her bank has offered her one of the four loan packages outlined in the chart below. Determine which of the four loans will be cheapest for Judy in the long run. All interest rates are compounded monthly.a. loan Ab. loan Bc. loan Cd. loan D A
Sam would like to use his extensive stamp collection as collateral for a secured loan. Sam has documentation that says his stamp collection is worth $10,525.00. Sam’s bank has a policy that permits loan officers to lend no more than 82.5% of the value of the collateral. What is the maximum loan amount Sam can get from his bank using his stamp collection as collateral?a. $8,683.13b. $9,700.00c. $10,525.00d. $12,382.35 A
Cindy would like to borrow money from her bank to restore her collectible car. It will take $12,000 to fully restore the car. Cindy’s bank offers secured loans at 89% of the collateral value. How much collateral does Cindy need to offer to get a loan big enough to allow her to fully restore her car?a. $3,100b. $10,680.00c. $12,000.00d. $13,483.15 D
Calculate the monthly payment for a loan of $7,500 with an 11% interest rate compounded monthly over a period of 5 years.a. $128.46b. $163.07c. $858.18d. $1541.50 B
Determine the finance charge on an $8,000 loan with a monthly payment of $162.80 for 60 months.a. $29.47b. $162.80c. $1,768.00d. $9,768.00 C
Sam needs to take out a personal loan for $8,900 to pay for a trip to Europe with his classmates. His bank has offered him the four loans listed in the chart below. Which of the four loans will give Sam the lowest monthly payment?a. loan Ab. loan Bc. loan Cd. loan D D
With respect to a personal loan, the finance charge a borrower pays is _____.a. an income tax on the loanb. the extra money he or she pays in interestc. usually a one time $20 application processing feed. something the borrower can opt out of with good credit B
Susan took out a personal loan for $3,500 at an interest rate of 13% compounded monthly. She made arrangements to pay the loan off in 3 years. What will her monthly payment be?a. $99.34b. $105.32c. $117.93d. $156.60 C
Tom would like to take out a secured loan to help pay for a vacation this summer. He has offered his car as collateral. His car is worth $3,500. His bank can offer loans for 80% of collateral value. The vacation he has planned will cost $4,750. Approximately how much additional collateral will Tom need to offer in order to borrow enough to go on his vacation as planned?a. $1,000.00b. $1,362.50c. $2,437.50d. $2,800.00 C
Jason used his car as collateral to borrow money from his bank. After losing his job, Jason is now unable to make his monthly payments for the loan, defaulting on the loan. If Jason is unable to continue to make his payments, what is likely to happen to his car?a. The bank will ask Jason to sell the car to help pay back his loan.b. The bank will seize the car and likely sell it to pay off Jason’s loan.c. The bank will notify the local government of Jason’s default on his loan, making it illegal for Jason to drive the car.d. The bank will put a “boot” on one wheel of the car, making it un-drivable until Jason begins making his payments again. B
Annie would like to take out a loan to put a new playground in her yard for her kids. She offers her car which is worth $7,800 as collateral. The loan officer at the bank is permitted to loan Annie 92% of the value of her collateral. How much will Annie be able to borrow for the playground using her car as collateral? a. $7,708.00b. $7,176.00c. $7,800.00d. $8,478.26 B
In a secured loan, collateral is _____.a. valuable property that the borrower promises to give the lender in the event of default on the loanb. an agreement made in civil court agreeing that the borrower may be arrested in the event of default on the loanc. an agreement signed by a co-borrower promising to pay the loan in the event the primary borrower defaults on the loand. and insurance policy taken out by the lender and paid for by the borrower to cover the lender from loss in the event of default NOT ; C
Ricky is taking out a personal loan for $12,000 to remodel his kitchen. He would like the lowest monthly payment possible, even if it means a bigger finance charge in the end. His bank has offered him a loan at 13% interest for 36 months or 12% interest for 60 months. Which of the following statements most accurately describes what Ricky should be thinking?a. More payments with the 60 month loan will give him the lowest monthly payment.b. Fewer payments with the 36 month loan will give him the lowest monthly payment.c. The 60 month loan comes with a bigger finance charge and, thus, a bigger monthly payment.d. The 36 month loan comes with a bigger finance charge and, thus, a bigger monthly payment. A
The following formula is used to calculate the monthly payment on a personal loan. In this formula, i represents the _____ of the loan.a. annual interest rateb. interest rate per periodc. initial amountd. incident amount NOT ; A

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