Unit 6 Practice Quiz
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Transcript of Unit 6 Practice Quiz
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Unit 6 Practice Quiz
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1. A deposit of $5000 is made in a trust fund that pays 7.5% interest, compounded monthly. It is specified that the balance will be given to AMDM College after the money has earned interest for 50 years. How much will AMDM College receive?:
Variable Value
N 0
I% 0.00%
PV $0.00
PMT $0.00
FV $0.00
P/Y 1
C/Y 1
end/begin 0
Variable Value
N 600
I% 7.50%
PV $5,000.00
PMT $0.00
FV ($210,138.69)
P/Y 12
C/Y 12
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2. Courtney has a balance on her Super Duper credit card of $7,000 that charges her 21% interest compounded monthly. If she pays $200 a month, how long will it take Courtney to pay the card off?
Variable ValueN #DIV/0!I% 0.00%PV $0.00 PMT $0.00 FV $0.00 P/Y 12C/Y 12end/begin 0
Variable ValueN 54.64633085I% 21.00%PV $7,000.00 PMT ($200.00)FV $0.00 P/Y 12C/Y 12end/begin 0
Years 4.55
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3. Woody and his wife want to finance $200,000 to buy a house. The mortgage company gives them two options. The first option is 5.5% for 30 years and the second option is 5.5% for 15 years.
What is the monthly difference in the two plans?
What is the total difference in the two plans?
Variable ValueN 180I% 5.50%PV $200,000.00 PMT ($1,634.17)FV $0.00 P/Y 12C/Y 12end/begin 0
Variable ValueN 360I% 5.50%PV $200,000.00 PMT ($1,135.58)FV $0.00 P/Y 12C/Y 12end/begin 0
$1,634.17 180 $294,150.60 $1,135.58 360 $408,808.80
$498.59 ($114,658.20)
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4. Ten years ago, Josh put money into an account paying 5.5% compounded monthly. If the account has $12,000 now, how much money did he deposit?
N 120I% 5.50%PV ($6,932.10)PMT $0.00 FV $12,000.00 P/Y 12C/Y 12end/begin 0
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5. Stock Texas is worth $20.00 per share on Monday. The interest rate drops on Tuesday, and Stock Texas is worth $35.00 per share.
What type of relationship exists between Stock Texas and Interest Rates?
As the interest rate drops, the price…
Since the variables are going in opposite directions this is an
inverse relationship.
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6. On Wednesday, Bond Math has the best risk rating, Aaa, at a price of $36. On Thursday, the risk rating drops to a lower rating of Aa, and the price drops to $32. What type of relationship can you assume that the price of Bond Math has with its risk ratings?
As the risk rating drops, the price…
Since the variable are going in the same direction this is a
direct relationship.
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7. Stock Bio has a price of $36 per share when Bond Math has a price of $20 per bond.Use an equation modeling the inverse variation between the stock and bond prices to predict the price of Stock Bios when Bond Math is worth $80?
Let B = Bond, S = Stock and K = some Constant
BS K(20)(36) K
720 K
(80) 720S 720
80S
$90S
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8. Benny’s credit card APR is 20% compounded daily. What is his actual interest rate per year—that is, his EAR?
1 1n
APREAR
n
365.2
1 1365
EAR
3651.000547945 1EAR
1.221335858 1EAR
.221335858EAR
22.13%EAR
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9. Marley has a credit card with an APR of 20% and a current balance of $12,000.00. Assume that the minimum payment is determined by 3.5% of the balance.
a. What is Marley’s minimum payment?
min 0.035(12000)min $420
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9. Marley has a credit card with an APR of 20% and a current balance of $12,000.00. Assume that the minimum payment is determined by 3.5% of the balance.
b. If Marley pays $400 a month until the debt is retired how long will it take her to pay off the debt?
Variable ValueN 41.93444966I% 20.00%PV $12,000.00 PMT ($400.00)FV $0.00 P/Y 12C/Y 12end/begin 0
3.49 Years
Variable ValueN 44.09380424I% 22.13%PV $12,000.00 PMT ($400.00)FV $0.00 P/Y 12C/Y 12end/begin 0
3.67 Years
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9. Marley has a credit card with an APR of 20% and a current balance of $12,000.00. Assume that the minimum payment is determined by 3.5% of the balance.
c. How much interest will Marley pay with this plan?
Variable ValueN 41.93444966I% 20.00%PV $12,000.00 PMT ($400.00)FV $0.00 P/Y 12C/Y 12end/begin 0
41.93444966(400) = $16,773.80
$16,773.80 – 12,000.00 =
$4,773.80