F30 – Unit 8 – Financial Mathematics – Loans Name: ____________________________Unit Practice Test Date: _____________________________

Unit 8 – Financial Mathematics – Loans – PRACTICE TEST

A = P + Prt or A = P(1 + rt) A=P(1+ rn )nt

*** FOR ALL FINANCIAL CALCULATOR QUESTIONS: Please show your work by writing out your N, I/Y, PV, PMT, FV, P/Y and C/Y values. ***

1. You borrow $7500 from the bank. The loan is to be repaid in 4 years at a simple interest rate of 3.8%a) What amount will you have to pay back?

b) How much interest will you have to pay?

2. You borrow $15 500 at 6.7% compounded monthly. The loan is to be repaid in 6 years. a) How much will you have to pay back?

b) How much interest will you pay?

3. You take out a loan of 4.44% loan, compounded semi-annually, that will be repaid in 2 years. You will only be able to spend $55 000 to pay off the loan. a) How much money will you borrow for the loan?

b) How much interest do you end up paying?

F30 – Unit 8 – Financial Mathematics – Loans Name: ____________________________Unit Practice Test Date: _____________________________

4. You borrow $2500 at 5.86%, compounded quarterly. You make regular monthly payments of $300. a) Create an amortization table to show the loan.

Payment Period Payment ($) Interest Paid Principal Paid ($) Balance ($)

b) How much interest do you end up paying?

5. You are buying a house that costs $298 000. You will finance the purchase with a 25-year mortgage with an interest rate of 2.75%, compounded quarterly. You must make a down payment of 8% a) How much is the down payment?

b) How much will your monthly mortgage payments be?

c) How much will you end up paying for the house overall?

d) How much interest do you pay?

F30 – Unit 8 – Financial Mathematics – Loans Name: ____________________________Unit Practice Test Date: _____________________________

6. You borrow $3200 at 5.9%, compounded monthly. You will pay off the debt by making regular monthly payments of $200. a) How long will it take to pay off your debt?

b) How much interest do you end up paying?

7. You need to borrow $7000. You have two options:

Option A: Borrow money from the bank at an interest rate of 4.5%, compounded quarterly, with monthly payments of $300.

Option B: Borrow money from your parents at an interest rate of 2.5%, compounded monthly, with monthly payments of $300.

a) How long would it take to pay off Option A. How much interest would you end up paying?

b) How long would it take to pay off Option B. How much interest would you end up paying?

c) Which option would you decide? Explain your decision.

F30 – Unit 8 – Financial Mathematics – Loans Name: ____________________________Unit Practice Test Date: _____________________________

8. You want to become debt-free in 5 years. You have two credit cards you are making payments on.

Credit Card A: Balance of $2054.08 and charges an interest rate of 19.2%, compounded daily. Credit Card B: Balance of $1056.88 and charges an interest rate of 18.9%, compounded daily.

You want to consolidate your debt on a line of credit that charges 6.5%, compounded monthly, which you will pay off with regular monthly payments.

a) How much will it cost to consolidate your loans on the line of credit?

b) How much will it cost to pay off credit card A alone?

c) How much will it cost to pay off credit card B alone?

d) How much will you save by consolidating your debt?

F30 – Unit 8 – Financial Mathematics – Loans Name: ____________________________Unit Practice Test Date: _____________________________

9. You need a car and have the following options:

Option A: Lease a car for 3 years for $150 per month and a down payment of $2500

Option B: Purchase a new car for $18,500, which would be financed with a bank loan at an interest rate of 2.9%, compounded monthly, and a down payment paid of $3000, paying off the loan in 3 years with regular monthly payments. The car depreciates so that it will be worthless after 3 years.

Option C: Rent a car at $35 a day for three years.

a) How much to lease the car for 3 years?

b) How much to buy the car over 3 years?

c) How much to rent the car for 3 years? (

10. A company replaces their cars every 5 years. A car is worth $25 750 after 3 years. The company uses a depreciation rate of 38%. a) How much will the car be worth at the end of the 5 years?

b) How much did the car originally cost?

F30 – Unit 8 – Financial Mathematics – Loans Name: ____________________________Unit Practice Test Date: _____________________________

11. You buy a house for $315 000. You will finance it with a 20-year mortgage at 3.7%, compounded quartly. The down payment of the house is $31 500 and you will pay off the mortgage in regular monthly payments. The house appreciates at a rate of 12% yearly. After 12 years living in the house you move out. What was the total cost of living in the house for 12 years?

F30 – Unit 8 – Financial Mathematics – Loans Name: ____________________________Unit Practice Test Date: _____________________________

F30 – Unit 8 – Financial Mathematics – Loans Name: ____________________________Unit Practice Test Date: _____________________________

F30 – Unit 8 – Financial Mathematics – Loans Name: ____________________________Unit Practice Test Date: _____________________________

F30 – Unit 8 – Financial Mathematics – Loans Name: ____________________________Unit Practice Test Date: _____________________________

F30 – Unit 8 – Financial Mathematics – Loans Name: ____________________________Unit Practice Test Date: _____________________________

F30 – Unit 8 – Financial Mathematics – Loans Name: ____________________________Unit Practice Test Date: _____________________________