Calculate the total amount of interest you will pay the bank


Question 1. How much must be invested today to have $1,000 in two years if the interest rate is 5%?

a.    $909.09
b.    $900.00
c.    $907.00
d.    $950.00

Question 2. Find the present value of $100 to be received at the end of two years if the discount rate is 12% compounded monthly.

a.    $66.50
b.    $78.76
c.    $68.80
d.    $91.80
e.    $79.75

Question 3. What is the most you should pay to receive the following cash flows if you require a return of 12 percent?

Year 1    $5,000
Year 2    $8,000
Year 3    $12,000
Year 4-10    $15,000

a.    $58,580
b.    $104,135
c.    $68,105
d.    none of the above

Question 4. Find the future value in two years of $100 that is deposited in an account, which pays 12%, compounded monthly.

a.    $160.00
b.    $112.70
c.    $118.80
d.    $125.40
e.    $126.97

Question 5. You have borrowed $180,000 to buy a new home. You plan to make monthly payments over a 25-year period. The bank has offered you a 10% interest rate compounded monthly. Calculate the total amount of interest you will pay the bank over the life of the loan.

a.    $301,499
b.    $307,541
c.    $310,545
d.    $319,766

Question 6. You have borrowed $130,000 to buy a new motor home. Your loan is to be repaid over 15 years at 8% compounded monthly If you pay an extra $200 per month on the motor home, how many years will it take to pay off the loan?

a.    10.3 years
b.    11. 5 years
c.    12.8 years
d.    13.3 years

Question 7. A perpetuity has a cash flow of $20 and a discount rate of 10%. What is the value of the perpetuity?

a.    $22
b.    $500
c.    $200
d.    none of the above

Question 8. Keith Stone has a 10-year-old daughter, Kate, who will be entering college in 8 years. Keith estimates college costs to be $16,000, $17,000, $18,000 and $19,000 payable at the beginning of each of Kate's four years in college. How much must Keith save each year (assume end of year payments) for each of the next 8 years to have enough savings to pay for Kate's education when she starts college? Assume Keith can earn 9% on his savings.

a.    $5,569
b.    $7,720
c.    $5,108
d.    $7,677

Question 9. Calculate the amount to be received at the end of year 1 that is equivalent to $150 at the end of year 1, $450 at the end of year 2, and $300 at the end of year 3, given a discount rate of 10%.

a.    $807
b.    $817
c.    $887
d.    $975
e.    $1,331

Question 10. You are considering an investment that will pay you $100 in Year 1, $500 in Year 2, $0 in Year 3 and $600 in Year 4. If you require a 12% return, what is the most you should pay for this investment today? (Round to nearest $)

a.    $915
b.    $869
c.    $734
d.    $698

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Finance Basics: Calculate the total amount of interest you will pay the bank
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