QUIZ - Amortization and Annuities

As a loan matures, larger portions go towards paying down the

• principal balance

• interest

• loan term

• none of the above

If you have an amortized loan, your monthly payment will _______________

• never be the same

• sometimes be the same

• always be the same

If a friend of yours had never heard of amortization before and asked you to explain how loan payments work, what would you say?

• Amortization is a scheduled breakdown of how much you'll pay every month (fixed) to repay a loan. It shows what portion of your payment is going to interest an principal each month.

• Every month, you pay the interest due first, and then all remaining portions of your payment goes toward paying down the principal balance

• Both statements are true.

Amortization is made up of what two parts?

• Interest and payment

• Principal and payment

• Interest and principal

• none of the above

Find the principal: The fixed payment is $250.50, the interest portion is $6.75

• 243.75

• 250.50

• 257.25

• 6.75

Jason deposits $2,000 yearly into a retirement account (ordinary annuity). The account pays 7% compounded annually. How much money will be in the account after 25 years?

• $78,268.97

• $126,498.08

• $42,160.07

• $124,498.10

How do we know we are looking at an Annuity question versus just a compound interest question?

• a number has changed by a certain percentage

• Interest is compounded "n" times per year

• the periodic rate is the annual interest rate

• You are making regular payments instead of a lump sum deposit

An ordinary annuity has regular payments made at the _____________ of every compounding period.

• beginning

• middle

• end

• none of the above

An IRA Account. Matthew contributes $50 per month into the Kaufman Fund that earns 15.5% annual interest. What is the value of Matthew's investment after 20 years?

• $88,888

• $1,132.76

• $80,367.73

• $7,593.39

Mr. Munguia is investing $5,000 quarterly for 2 years at 6% interest in an annuity. How much money is in the account at maturity?

• $42,270.20

• $42,164.20

• $52,164.20

• $42,284.89