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Exam 10: Simple Interest

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Question 41

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Simple Interest = principal × rate.

A) True
B) False

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Question 42

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Jill Ley took out a loan for $60,000 to pay for her child's education. The loan would be repaid at the end of eight years in one payment with interest of 6%. The total amount Jill has to pay back at the end of the loan is:

A) $88,008
B) $80,800
C) $88,800
D) $28,800
E) None of these

F) A) and C)
G) A) and B)

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Question 43

Multiple Choice

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Banks and other financial institutions sometimes calculate simple interest based on:

The amount a bank charges for the use of money is called interest.

The time of a loan could be expressed in months, years, or days.

Round all answers to the nearest cent. Woody's Café's real estate tax of $1,110.85 was due on November 1, 2017. Due to financial problems, Woody was unable to pay his café's real estate tax bill until January 15, 2018. The penalty for late payment is 8 1/4% ordinary interest. (A)What is the penalty Woody will have to pay and (B)what will Woody pay on January 15?

Given: an 11% 120-day $9,000 note. Find the adjusted balance (principal)using the U.S. Rule (360 days)after the first payment on the 65th day of $1,000.

Interest on $5,255 at 12% for 30 days (use ordinary interest) is:

In the U.S. Rule, the partial payment first covers the interest and the remainder reduces the principal.

Find A and B in the table below. $\begin{array} { | l | l | l | l | l | } \hline \text { Principal } & \text { Interest Rate } & \text { Time } & \begin{array} { l } \text { Simple } \\\text { Interest }\end{array} & \begin{array} { l } \text { Total Amount } \\\text { Owed }\end{array} \\\hline \$ 25,000 & 10 \% & 2 \text { yrs } & \text { A } & \text { B } \\\hline\end{array}$

Find A and B in the table below. $\begin{array} { | l | l | l | l | l | } \hline \text { Principal } & \text { Interest Rate } & \text { Time } & \begin{array} { l } \text { Simple } \\\text { Interest }\end{array} & \begin{array} { l } \text { Total Amount } \\\text { Owed }\end{array} \\\hline \$ 16,000 & 8 \% & 3 \mathrm { mos } & \mathrm { A } & \mathrm { B } \\\hline\end{array}$

Ordinary interest is required by all banks.

Jane Smith took out a loan for $40,000 to pay for her child's education. The loan would be repaid at the end of eight years in one payment with interest of 12%. What is the total amount Jane has to pay back at the end of the loan?

Round all answers to the nearest cent. Angel Hall borrowed $82,000 for her granddaughter's college education. She must repay the loan at the end of nine years with 9¼% interest. What is the maturity value Angel must repay?

Rate is equal to interest divided by the principal times time.

Match the following terms with their definitions. -Simple interest formula

Which of the following is not true of the U.S. Rule?

Solve: $\begin{array} { | l | l | l | l | } \hline \text { Principal } & \text { Rate } & \text { Time } & \begin{array} { l } \text { Simple } \\\text { Interest }\end{array} \\\hline \$ 6,000 & ? & 6 \mathrm { mos } & \$ 330 \\\hline\end{array}$

Sandra Gloy borrowed $5,000 on a 120-day 5% note. Sandra paid $500 toward the note on day 40. On day 90 she paid an additional $500. Using the U.S. Rule, her adjusted balance after the first payment is:

Solve: $\begin{array} { | l | l | l | l | } \hline \text { Principal } & \text { Rate } & \begin{array} { l } \text { Time (in } \\\text { years) }\end{array} & \begin{array} { l } \text { Simple } \\\text { Interest }\end{array} \\\hline \$ 5,000 & 5 \% & ? & \$ 800 \\\hline\end{array}$