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

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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

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