Unit 5 Lessons 1 and 2 Quiz Review Day 2

Unit 5 Lessons 1 and 2 Quiz Review Day 2

Applied Business Math 3/22/22

Down Payment: Using your own money to lower the amount needed to borrow

Amount Financed: The amount of money that is borrowed to purchase a good or service


Installment Loan: A type of loan where you have a fixed payment amount over the course of the loan

Vocab Needed

Interest is the amount it costs to finance (borrow) from a bank, store, etc.

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​I = Principle x Rate x Time

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​Must have time in terms of years

​INTEREST FORMULA

Multiple Choice

Charles E. Cheese wants to buy a new pizza oven for his store. He will finance $2,500 for 6 months at a rate of 11%. How much interest did he pay?

• $1,650

• $137.50

• $275

• $195.38

Sometimes you need to find the amount in a payment that is applied to the principle of loan.

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1) Find interest for current month

2) Subtract from Payment

3) What's left over is amount applied to principle​

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FINDING AMOUNT APPLIED TO PRINCIPLE

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​In a monthly payment, some of the payment goes to paying down the loan and some goes to paying on the interest accumulated.

​MONTHLY PAYMENT

​Amount applied to Principle

​Amount applied to Interest

​The sum of these two should equal monthly payment

1) Find the interest paid for the month. Since we are talking about 1 month, rate is % / 12.

I = PRT

I = $29,950 x (5.75% / 12) x 1 month

I = ​$143.51

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2) Subtract that from payment. This is the amount applied to principle

$572.50 - $143.51 = ​$428.99

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3) ​New Bal = $29,950 - $428.99 = $29,521.99

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​EXAMPLE

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John bought a truck for $29,950. His monthly payment is $572.50 a month. His annual interest rate (APR) is 5.75%. For his first month, how much was applied to the principle? What is his new balance?

Multiple Choice

Johnny B. Goode decided to buy a new tractor for $115,000. His APR is 7.50% and his monthly payment is $1,020.00. How much does he owe after the first month?

• $718.75

• $114,923.50

• $113,980

• $114,698.75

​Maturity Value means principle plus interest

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Multiple Choice

The _______ is the portion of the cash price that is owed on an item after making the down payment. 

• down payment 
• amount financed 
• final payment 
• installment loan

Multiple Choice

Gene's bank granted him a singe-payment loan of $5,000 for 90 days at 9% ordinary interest. What is the amount of ordinary interest owned?

• $110.96

• $150.00

• $132.50

• $156.20

Multiple Choice

Scott's bank granted him a single-payment loan of $3,250 to repair bill. HE agreed to repay the loan in 31 days at an exact interest rate of 11.75%. What is the maturity value of the loan?

• $3,211.09

• $3,282.43

• $3300.90

• $3,554.66

Multiple Choice

Ethan obtained a loan of $2,400 to install a new roof on his home. The interest rate is 12% and the monthly payment is $113.04. What is the interest on the first monthly payment?

• $24.00

• $25.04

• $29.90

• $32.01

Multiple Choice

Maturity Value

• 18 years old

• the total amount you must repay

• you repay with one payment after a specified period of time.

• a type of single-payment loan

Multiple Choice

Jo John financed $3,500 with an annual interest rate of 15% for 24 months. If his monthly payment is $169.70, how much of his payment will go towards principle?

• $43.75

• $101.42

• $125.95

• $35.00

Multiple Choice

Tyron Shipp borrows $800 from the local bank, at an annual rate of 6.85%. The loan period is 37 weeks. How much money will he have to pay back at the end of the loan?

• $894.64

• $864.52

• $848.27

• $838.99

Multiple Choice

What does APR stand for?

• Annual Percentage Rate

• Apples Per Ripe

• Annual Percentage Real

• Aging Percentage Rate

Multiple Choice

What is the interest of the loan?

• the initial amount of the loan

• the cost of borrowing the loan

• the period of time you take out the loan for

• a manager in charge of the loan

Multiple Choice

What is the principal of the loan?

• the initial amount of the loan

• the cost of borrowing the loan

• the period of time you take out the loan for

• a manager in charge of the loan

Multiple Choice

You can find the rate of interest by dividing the interest by the principal.

• True

• False