# Multi choice: interest, amortization, loan, APR, Banker rule

1. The amount of money borrowed or invested is called the maturity value. ()

True

False

2. When solving a simple interest problem, the rate should be written as a decimal number. ()

True

False

3. 8% for 45 days is equal to 0.01. ()

True

False

4. Bank loans and car loans are examples of open-end loans. ()

True

False

5. The cash price of an item is the amount you would have paid if the full amount was paid at the time of purchase. ()

True

False

6. The total cost of an installment purchase is equal to the number of payments times the amount of each payment minus the down payment. ()

True

False

7. The Truth in Lending Act requires the APR be accurately stated to the nearest of 1 percent. (s: )

True

False

8. The monthly payments are calculated by adding the finance charge and the amount financed and dividing by the number of payments in the loan. ()

True

False

9. A term frequently used to mean interest is: ()

annual percent rate charge

finance charge

carrying charge

both B and C

none of the above

10. The amount of a loan is: ()

the installment price + interest - down payment

installment price - interest - down payment

installment price - interest + down payment

installment price - payments + purchases

none of the above

11. John purchased a new boat for $24,600.00. He put a $5,400.00 down payment on it. The bank's loan was for 60 months. Finance charges totaled $6,400.00. His monthly payment was: ( )

$106.67

$410.00

$250.00

$426.67

none of the above

12. The formula for ordinary interest using exact time is: ()

exact days divided by 365

exact days divided by 360

30 divided by 360

30 divided by 365

none of the above

13. The method used to calculate interest that is sometimes known as the Banker's Rule is: ()

exact interest using exact time

exact interest using ordinary time

ordinary interest using ordinary time

ordinary interest using exact time

none of the above

14. The proceeds of a $7,500.00, 10% simple discounted note for 85 days is: (

$7,674.66

$7,322.92

$7,677.08

$7,325.34

none of the above

15. In a non-interest bearing note, the maturity value is the same as the: ()

proceeds

principal

discount

principal plus interest

none of the above

#### Solution Preview

1. The amount of money borrowed or invested is called the maturity value. ()

True

False

False: maturity value refers to the amount at the end, like a CD on the expiration date.

2. When solving a simple interest problem, the rate should be written as a decimal number. ()

True

False

True: to avoid a 2 decimal place error.

3. 8% for 45 days is equal to 0.01. ()

True

False

True: .08 x 45 days / 360 = .01

4. Bank loans and car loans are examples of open-end loans. ()

True

False

False: open end loans are more like lines of credit, commercial or construction loans

5. The cash price of an item is the amount you would have paid if the full amount was paid at the time of purchase. ()

True

False

True: meaning no impact of interest costs.

6. The total cost of an installment purchase is equal to the number of payments times the amount of each payment minus the down payment. ()

True

...

#### Solution Summary

Each of the 15 questions gives a sentence or two of explanation including calculations, as necessary