Answers26-27 Ignite Technical Math-Financial Math - MA2007Borrowing Money

Borrowing Money Answers

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1
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Jocelyn is considering taking out one of the two following loans. Loan H is a three-year loan with a principal of $5,650 and an interest rate of 12.24%, compounded monthly. Loan I is a four-year loan with a principal of $6,830 and an interest rate of 10.97%, compounded monthly. Which loan will have the smaller monthly payment, and how much smaller will it be? Round all dollar values to the nearest cent.

A
Loan H's monthly payment will be $42.46 smaller than Loan I's.
B
Loan H's monthly payment will be $140.79 smaller than Loan I's.
C
Loan I's monthly payment will be $11.88 smaller than Loan H's.
D
Loan I's monthly payment will be $26.98 smaller than Loan H's.
2
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Which of these best fits the definition of interest, as it applies to finance?

A
Interest is the money earned by investing.
B
Interest is the cost of borrowing money.
C
Interest is the cost of investing poorly.
D
Interest is the portion of a loan which must be repaid every year.
3

Say you take out a loan with a principal of $44,500. The interest rate is 13.11%, compounded monthly. If you make consistent monthly payments and pay off the loan over the course of six and a half years, how much interest will you have paid in total? Round dollar amounts to the nearest cent.

A
$21,849.92
B
$3,018.03
C
$20,003.60
D
$24,321.18
4

Suppose that you took out a loan with a principal of $24,680. To pay off the principal and the interest, you made quarterly payments of $1,382 for six years. Furthermore, you paid a service charge of $396. What was your total finance charge?

A
$396
B
$8,488
C
$8,884
D
$8,292
5

What is the difference between a service charge and a finance charge?

A
A service charge is a fee which must be paid every month, while a finance charge is a one-time fee assessed at the beginning or end of a loan period.
B
A service charge is a flat fee charged to a borrower, while a finance charge is a fee charged to a borrower based on the amount borrowed.
C
A service charge is a fee assessed by a lender, while a finance charge is a fee charged by a financial institution, such as a bank.
D
A service charge is a fee assessed by a lender other than interest, and a finance charge is the total of the interest paid on a loan and the service charge.
6

Dana just finished paying off the $15,400 loan she took out four years ago. The loan had 6.68% interest, compounded monthly. If Dana paid a total of $18,321.60, how much did she pay in service charges?

A
$730.08
B
$366.49
C
$1,028.72
D
$266.76
7

Travis took out a six-year loan with a principal of $15,000. He made monthly payments of $225 for the entire period, at which point the loan was paid off. How much did Travis pay in interest?

A
$1,200
B
$1,350
C
$800
D
$0
8

Tamora just made the last of her monthly payments on her loan. She had been making these payments for the past nine years. The loan had a principal of $10,675 and an interest rate of 4.75%, compounded monthly. In addition, Tamora paid $939.25 in service charges. What was Tamora’s total finance charge? Round all dollar values to the nearest cent.

A
$939.25
B
$11,614.25
C
$3,403.53
D
$2,464.28
9

Dahlia is trying to decide which bank she should use for a loan she wants to take out. In either case, the principal of the loan will be $19,450, and Dahlia will make monthly payments. Bank P offers a nine-year loan with an interest rate of 5.8%, compounded monthly, and assesses a service charge of $925.00. Bank Q offers a ten-year loan with an interest rate of 5.5%, compounded monthly, and assesses a service charge of $690.85. Which loan will have the greater total finance charge, and how much greater will it be? Round all dollar values to the nearest cent.

A
Loan Q’s finance charge will be $83.73 greater than Loan P’s.
B
Loan Q’s finance charge will be $317.88 greater than Loan P’s.
C
Loan P’s finance charge will be $20.51 greater than Loan Q’s.
D
Loan P’s finance charge will be $234.15 greater than Loan Q’s.
10

Chelsea made monthly payments for four years before her $13,440 loan was paid off. The loan had an interest rate of 5.86%, compounded monthly. Chelsea paid $156.60 in service charges. To the nearest tenth, what percentage of the total cost of the loan did her finance charges comprise? Round all dollar values to the nearest cent.

A
13.6%
B
10.9%
C
9.4%
D
11.9%
11

What procedure does How to Find Out Anything teach readers?

A
how to locate information without using the Internet
B
how to write a well-organized research paper
C
how to conduct research effectively and efficiently
D
how to analyze text features to better understand a text
12

Dahlia is trying to decide which bank she should use for a loan she wants to take out. In either case, the principal of the loan will be $19,450, and Dahlia will make monthly payments. Bank P offers a nine-year loan with an interest rate of 5.8%, compounded monthly, and assesses a service charge of $925.00. Bank Q offers a ten-year loan with an interest rate of 5.5%, compounded monthly, and assesses a service charge of $690.85. Which loan will have the greater total finance charge, and how much greater will it be? Round all dollar values to the nearest cent.

A
Loan Q’s finance charge will be $83.73 greater than Loan P’s.
B
Loan Q’s finance charge will be $317.88 greater than Loan P’s.
C
Loan P’s finance charge will be $20.51 greater than Loan Q’s.
D
Loan P’s finance charge will be $234.15 greater than Loan Q’s.
13

Yvette is considering taking out a loan with a principal of $16,200 from one of two banks. Bank F charges an interest rate of 5.7%, compounded monthly, and requires that the loan be paid off in eight years. Bank G charges an interest rate of 6.2%, compounded monthly, and requires that the loan be paid off in seven years. How would you recommend that Yvette choose her loan?

A
Bank F offers a better loan in every regard, so Yvette should choose it over Bank G’s.
B
Yvette should choose Bank F’s loan if she cares more about lower monthly payments, and she should choose Bank G’s loan if she cares more about the lowest lifetime cost.
C
Yvette should choose Bank G’s loan if she cares more about lower monthly payments, and she should choose Bank F’s loan if she cares more about the lowest lifetime cost.
D
Bank G offers a better loan in every regard, so Yvette should choose it over Bank F’s.
14

What is the difference between a service charge and a finance charge?

A
A service charge is a fee which must be paid every month, while a finance charge is a one-time fee assessed at the beginning or end of a loan period.
B
A service charge is a flat fee charged to a borrower, while a finance charge is a fee charged to a borrower based on the amount borrowed.
C
A service charge is a fee assessed by a lender, while a finance charge is a fee charged by a financial institution, such as a bank.
D
A service charge is a fee assessed by a lender other than interest, and a finance charge is the total of the interest paid on a loan and the service charge.
15

Yvette is considering taking out a loan with a principal of $16,200 from one of two banks. Bank F charges an interest rate of 5.7%, compounded monthly, and requires that the loan be paid off in eight years. Bank G charges an interest rate of 6.2%, compounded monthly, and requires that the loan be paid off in seven years. How would you recommend that Yvette choose her loan?

A
Bank F offers a better loan in every regard, so Yvette should choose it over Bank G’s.
B
Yvette should choose Bank F’s loan if she cares more about lower monthly payments, and she should choose Bank G’s loan if she cares more about the lowest lifetime cost.
C
Yvette should choose Bank G’s loan if she cares more about lower monthly payments, and she should choose Bank F’s loan if she cares more about the lowest lifetime cost.
D
Bank G offers a better loan in every regard, so Yvette should choose it over Bank F’s.
16

How does Truth-in-lending benefit consumers when shopping for a loan?

A
Truth-in-lending allows consumers to be frank with the lenders and talk about very personal things.
B
Truth-in-lending requires all lending institutions to eventually convert all of their loans to fixed interest rates.
C
Truth-in-lending requires consumers to admit whether or not they can actually afford the loan they’re applying for.
D
Truth-in-lending allows consumers to know every cost that is associated with the loans they research and apply for, and helps them reach the optimal decision.
17

Colin took out a loan with a principal of $32,800. After five years, the interest and principal totaled $48,872. If Colin made monthly payments of $816 for five years until the loan was paid off, how much did Colin pay in service charges?

A
$16,072
B
$88
C
$16,160
D
$163
18

You are considering taking out one of two loans. Loan R has a principal of $17,550, an interest rate of 5.32% (compounded monthly), and a duration of seven years. Loan S has a principal of $15,925, an interest rate of 6.07% (compounded monthly), and a duration of nine years. Assuming that you pay back each in monthly intervals, which loan will have a greater lifetime total, and how much greater will it be? Round all dollar values to the nearest cent.

A
Loan S’s lifetime total will be $1,274.12 greater than Loan R’s.
B
Loan S’s lifetime total will be $32.99 greater than Loan R’s.
C
Loan R’s lifetime total will be $350.88 greater than Loan S’s.
D
Loan R’s lifetime total will be $58.96 greater than Loan S’s.
19

Why is the interest rate of a loan one of the most important things to consider when shopping around for loans?

A
The interest rate should be ignored, because there’s nothing a consumer can do to change it.
B
The interest rate is essentially how long you have to pay off your loan, and the shorter the better.
C
The interest rate can drastically change the total amount paid to the lender, in the case of mortgages, up to thousands of dollars.
D
The interest rate does not change, even between banks, so choosing the right time to borrow is essential.
20

Chelsea made monthly payments for four years before her $13,440 loan was paid off. The loan had an interest rate of 5.86%, compounded monthly. Chelsea paid $156.60 in service charges. To the nearest tenth, what percentage of the total cost of the loan did her finance charges comprise? Round all dollar values to the nearest cent.

A
13.6%
B
10.9%
C
9.4%
D
11.9%

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