Chapter 3

An employee borrows $10,000 on June 7 and must repay a total of
$10,700 exactly 1 year later. Determine the interest rate
per year.

• 5% per year

• 7% per year

• 9% per year

• 10% per year

A company plans to borrow $20,000 from a bank for 1 year at 9% interest for
new recording equipment. Calculate the simple interest and total amount due after 1
year., respectively

• $1,800 and $21,800

• $1,600 and $21,600

• $21,800 and $1,800

A sum of money was doubled in 17.5 years. What was the interest rate every 6 months?

• 3%

• 2%

• 5%

A bank gave your friend $1,000 for three years at a compound interest rate
of 8% per year. How much money the bank should be receiving from your
friend at the end of these three years? (Note: F = P (1+i)^n)

• $2,981.37

• $1,688

• $1,259.71

If you deposit $100 now (n = 0) and $200 two years from now (n = 2) in a
savings account that pays 10% interest, how much would you have at the
end of year 10?

• $688

• $731

• $668

If you want to have $800 in savings at the end of four years, and 5% interest
is paid annually, how much do you need to put into the savings account
today?

• $658.16

• $724.56

• $635.46

If $100 will be worth $110 next year and its worth was $90 a year ago, compute the
interest rate for the past year and the interest rate for the next year, respectively?

• 10% and 11.1%

• 11.1% and 10%

• 10.1% and 11%

Assume that $90 is invested a year ago will return $150 after 5 years from now. What is
the annual interest rate in this situation?

• 7.5%

• 8.5%

• 8.9%

How long does it take to double your investment considering a compound interest of 8% per year?

• 7.5 years

• 9 years

• 12.5 years

If you deposit $2000 in a bank that pays 5% nominal interest, compounded
continuously, how much would be in the account at the end of 2 years?

• $2,210.40

• $2,140.20

• $2,420.10