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Multiple Choice questions on TVM (Time Value of Money)

Question 1. On March 5th, a couple took out a 90-day loan for $450 at 9% interest. On March 29th, they made a partial payment of $150. After making the payment, how much did they still owe?

a. $300.00
b. $300.90
c. $301.80
d. $302.70

Question 2: On January 10th, Park & Jason, Inc. took out a 3-month , 8% note for $3,000. On February 24th, they paid $1,000 towards the debt. How much did they owe on April 10th when the note can due?

a. $2,000.33
b. $2,050.30
c. $2,033.33
d. $2,056.25

Question 3: On June 1st, a school teacher signed a 2-month note for $600 at 12% to pay for a vacation. On July 1st, he paid $300 on the loan, and July 31st, he paid off the loan. What is the total interest he paid on the loan?

a. $9.06
b. $9.15
c. $12.00
d. $12.20

Question 4 : Charlie Consumer's credit card balance on April 1st was $40. On April 7th, he made a $10 payment and on April 25th he charged a $25 item. If his credit card company charges a finance charge of 2% on the average daily balance, what will be his balance on May 1st when he receives his next statement?

a. $55.83
b. $55.19
c. $55.65
d. $55.37

Question 5 : Ellen Nancy borrowed $500 at 12% simple interest, to be repaid in 8 equal monthly installments of $70. If she pays off the loan when she makes her 4th payment, how much will she save in finance charges under the rule of 78s?

a. $17.19
b. $21.43
c. $30.00
d. $16.67

Question 6: Which of the following investments will produce the largest interest?

a. $100 a quarter for 5 years at 8% compounded quarterly
b. $1,000 at 7% simple interest for 6 years
c. $1,000 at 6% interest compounded annually for 4 years
d. $1,000 at 6% interest compounded quarterly for 4 years

Question 7 : If an employee deposits $20 at the end of each month into his company's plan which pays 6% interest compounded monthly, how much will he have in the account at the end of 5 years?

a. $101.01
b. $1,301.01
c. $1,395.40
d. $10,662.56

Question 8: Find the present value of an annuity with payments of $40 a quarter for 10 years, if interest rates are 12% compounded quarterly.

a. $983.64
b. $990.49
c. $925.91
d. $924.59

Question 9: A young couple takes out a $80,000 mortgage to buy a new condominium. They finance the loan at 7% compounded quarterly for 20 years. To the nearest $10, how much interest will they pay over the 20-year life of the loan?

a. $69,250.00
b. $42,750.00
c. $15,510.00
d. $40,970.00

Question 10: Megatown, USA issued 10-year bonds totaling $2,500,000 for construction of new service roads and entrance ramps onto the freeway. The town set up a sinking fund at 12% compounded quarterly. What was the quarterly payment into this fund?

a. $34,520.00
b. $33,155.00
c. $34,250.00
d. $33,515.00

Please see the attached file for complete description of the questions.

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Solution Summary

This solution is provided in a Word document and answers the multiple choice questions related to time value of money. Answers are given with no explanation.