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Q:

You deposit $300 in a savings account that pays 4% simple annual interest. Find your account balance after 9 months.

A) 309	B) 409
C) 609	D) 509

Answer & Explanation Answer: A) 309

Explanation:

A = P + Prt

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Q:

Josh borrowed $250 from his mother to buy an electric scooter. Josh will pay her back in 1 year with 3% simple annual interest. How much interest will Josh pay?

A) 7.50	B) 8.50
C) 9.50	D) 10.50

Answer & Explanation Answer: A) 7.50

Explanation:

I=prt/100

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Q:

At 3% annual interest compounded monthly, how long will it take to double your money?

A) 20.1	B) 21.1
C) 22.1	D) 23.1

Answer & Explanation Answer: D) 23.1

Explanation:

At first glance it might seem that this problem cannot be solved because we do not have enough
information. It can be solved as long as you double whatever amount you start with. If we start with
$100, then P = $100 and FV = $200.

FV=P(1+r/n)^nt

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Q:

How much money would you need to deposit today at 9% annual interest compounded monthly to have $12000 in the account after 6 years?

A) 9007	B) 4007
C) 7007.08	D) 8oo7

Answer & Explanation Answer: C) 7007.08

Explanation:

FV=P(1+r/n)^nt

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Q:

If you deposit $6500 into an account paying 8% annual interest compounded monthly, how
much money will be in the account after 7 years?

A) 11358.24	B) 12334
C) 15789	D) 12386

Answer & Explanation Answer: A) 11358.24

Explanation:

FV=P(1+r/n)^nt

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Q:

If you deposit $4000 into an account paying 6% annual interest compounded quarterly, how much money will be in the account after 5 years ?

A) 3387.42	B) 4387.42
C) 5387.42	D) 6387.42

Answer & Explanation Answer: C) 5387.42

Explanation:

The mathematical formula for calculating compound interest depends on several factors. These factors include the amount of money deposited called the principal, the annual interest rate (in decimal form), the number of times the money is compounded per year, and the number of years the money is left in the bank.

$F V = p {(1 + \frac{r}{n})}^{n t}$

FV = Future value of the Deposit

p = Principal or Amount of Money deposited

r = Annual Interest Rate (in decimal form )

n = No of times compounded per year

t = time in years

$F V = 4000 {[1 + \frac{0.06}{4}]}^{4 (5)}$ = 5387.42

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Q:

Jason decides to borrow money for a holiday. If a personal loan is taken over 4 years with equal quarterly repayments at 12% p.a. flat rate (simple interest), calculate the effective rate of interest.

A) 22,588	B) 32.588
C) 42.588	D) 43.588

Answer & Explanation Answer: A) 22,588

Explanation:

Flat rate = 12%
n = 4 × 4
= 16

Effective rate =2n/(n+1) × flat rate

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Filed Under: Simple Interest
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Q:

Car is purchased on hire-purchase. The cash price is $21 000 and the terms are a deposit of 10% of the price, then the balance to be paid off over 60 equal monthly instalments. Interest is charged at 12% p.a. What is the total cost of the car?

A) 30.240	B) 31.240
C) 33.240	D) 32,240

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