Financial Unit Part 1 RETAKE

Which type of interest earns interest on the principal only?

• Simple

• Compound

• Both Simple and Compound

Which of the following best describes interest as it relates to a savings account?

• The charge for the privilege of borrowing money

• Additional money earned for having an account

• The limit for which an individual may use credit

Derrick wants to calculate the total value he would have from investing $500 into an account that earns 5.2% annual compound interest for 60 months. Which of the following formulas is set up correctly to help him do this?

• A = 500(1+5.2)⁶⁰

• A = 500(1+.052)⁵

• A = 500(1+.52)⁵

Roxanne has $2,000 that she plans to invest into an account that earns 6% simple interest. Assuming she makes no additional deposits or withdrawals, how much interest will Roxanne earn after 15 years?

• $1,800

• $18,000

• $180,000

Salvador inherited $20,000 and he plans to invest it into a savings account that earns 5% interest compounded

annually. Assuming he makes no additional deposits or withdrawals, what will be the interest of Salvador’s account after 10 years?

• $32,577.89

• $10,000

• $12,577.89

Cynthia has earned $3,000 and wants to put it in a savings account that earns 5% simple interest. Assuming she makes

no additional deposits or withdrawals, what will be the total value of Cynthia’s account after 48 months?

• $3,600

• $600

• $3,646.52

Paul and Joe each invest $15,000 into savings accounts

that earn 4.5% interest. Paul’s account earns simple

interest and Joe’s account earns compound interest. After

15 years, who will earn more interest and how much more

will he earn?

• Joe's will earn $3,904.24 more interest.

• Paul's will earn $3,904.24 more interest.

• Joe's will earn $18,904.24 more interest.

• Paul's will earn $18,904.24 more interest.

James has $4,300 in credit card debt with 14% interest that he wants to pay off in 24 months. He will need to make monthly payments of $206.46 each month. Calculate the total cost of repayment and the interest James will pay.

• Total: $4,955.04; Interest: $655.04

• Total: $4712.92; Interest: $412.92

• Total: $14,448; Interest: $10,148

At a local bank, the interest rate on a $3,500 personal loan with a 3-year term depends on a personal credit. A person with excellent credit would qualify for a 6% interest rate while a person with poor credit would qualify for a 20% interest rate.

After repaying the loan, how much more interest would a person with poor credit pay compared to a person with excellent credit?

• $4,682.52

• $3,833.28

• $849.24

• Each person would end up paying the same amount.

Which formula would help you with calculating the interest earned on a deposit of $350 in an account that earns 6% simple interest after 15 years?

• I = 350(.6)(15)

• I = 350(.06)(15)

• A = 350(.06)(15) + 350

• A = 350(.6)(15) + 350