Chapter 8 Review

A simple interest loan has a term of 1 year. How many payments does the bank expect you to make?

• 12

• 1

• 6

• 24

You take out a 2 year installment loan. How many payments are you expected to make?

• 12

• 1

• 24

• 48

You are paying off a 5 year installment loan. For the first two years, you make the minimum monthly payment. After two years you make a final payment to close the loan 3 years early. Which of the following best describes this situation.

• You have payed off the loan with the minimum finance charge possible.

• You have payed off the loan, and saved some money on the finance charge.

• You have payed off the loan, but have also payed the maximum finance charge possible.

• You still have payments left to make.

Jim needs to borrow money to purchase a new computer. He takes out a $700 loan for 200 days at 9.5% ordinary interest. What is the interest owed?

• $736.94

• $36.94

• $36.44

• $736.44

Jim needs to borrow money to purchase a new computer. He takes out a $700 loan for 200 days at 9.5% exact interest. What is the maturity value?

• $736.94

• $36.94

• $36.44

• $736.44

Sally needs to borrow money to purchase a car. She takes out a $5300 loan for 400 days at 8.7% exact interest. What is the maturity value of her loan?

• $505.32

• $512.33

• $5812.33

• $5805.32

Which of the following options is 'cheaper' for the customer. Ordinary, or Exact interest? (hint: calculate the maturity value of a $1000 loan at 5% interest under both conditions and compare)

• A loan with Ordinary interest is cheaper.

• A loan with Exact interest is cheaper.

Blake is purchasing a new car. The cost of the car is $21,899. Blake makes a 15% down payment, and receives an installment loan for the remaining cost of the car. What is the principal on Blake's loan?

• $3,284.85

• $25,183.85

• $18,614.15

• $21,899.00

Blake is purchasing a new car. He receives an installment loan with a principal of $18,614.15. The loan has an interest rate of 12% and a 3 year term. What is the monthly payment on his loan?

• $617.99

• $3.32

• $186.14

• $876.73

Blake purchases a new car with an installment loan. His initial principal is $18,614.15, and he makes monthly payments of $617.99 for the entire 3 year team. What is the total amount repaid for his loan?

• $22,247.64

• $40,861.79

• $3633.49

• $617.99