n n

I = Prt A = P (1 + i) FV = PV (1 + i)
[1 year = 12 months = 52 weeks = 365 days, semi-annual = 2/year, quarterly = 4/year, bi-weekly = every 2 weeks]

Instructions: On a seperate sheet, show full solutions for every question.

Self Quiz - Financial Word Problems (Simple & Compound)

Multiple Choice
Identify the choice that best completes the statement or answers the question.

1. Kevin invests $725 at 5.2%/a simple interest. What is the total amount in Kevin’s account at the end of 5 years?
a. $188.50 c. $913.50
b. $189.50 d. $2610.00

2. What is the interest earned on $6500 at 8% simple interest for 9 months?

a. $390 c. $4860
b. $520 d. $6890

3. Sabine borrows $2300 for 36 months at a fixed rate of simple interest. At the end of the time, she owes $2748.50.
What interest rate is she being charged?
a. 4.9%/a c. 12.5%/a
b. 6.5%/a d. 29.9%/a

4. Colleen invests $1600 at 3.1% simple interest. How long will she have to leave her investment in the bank before
earning $500 in interest?
a. 2 years and 79 days c. 49 years and 219 days
b. 10 years and 29 days d. 70 years and 353 days

5. Kate borrowed $3000 at 3.6%/a compounded monthly for 4 years. What is the future value of her investment?
a. $3009.00 c. $3432.00
b. $3036.16 d. $3463.91

6. For an investment of $20 000 at 7.2%/a compounded semi-annually for 7 years, what is the total interest earned?
a. $12 814.56 c. $32 936.72
b. $32 814.56 d. $52 936.72

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Name: ________________________ ID: A

7. Maria borrows $12 000 at 9%/a interest compounded monthly for 10 years. How much money will she owe at the
end of 10 years?
a. $12 930.99 c. $28 408.36
b. $17 416.28 d. $29 416.28

8. Which word or phrase cannot be used to describe the total amount for an investment that is calculated by applying
the interest rate to the principal and any interest already earned?
a. geometric series c. linear function
b. exponential growth d. compound

9. Jamal borrowed some money at 8.4% compounded quarterly. After 4 years, he repays $5926.53 for the principal
and interest. How much money did Jamal borrow?
a. $4250.00 c. $5868.22
b. $5453.78 d. $8264.42

10. Isaac is investing $16 000 that he would like to grow to at least $100 000 by the time he retires in 50 years. What
annual interest rate, compounded annually, will provide this?
a. 3.37% c. 5.70%
b. 3.73% d. 12.50%

Short Answer

11. Gayle has money invested in an account. After 6 years, compounded monthly, she will have $6044.34 in her
account, $1344.34 of which is earned interest. What is the interest rate of Gayle’s account? Round your answer to
two decimal places.

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Name: ________________________ ID: A

12. Thuong and Carol both want to save $20 000 for college in 8 years. Thuong can invest at 3%/a compounded
quarterly, and Carol can invest 3.2%/a compounded semi-annually. Who has to invest less to reach the goal? How
much less?

13. Stephen invests $40 000 at 4.4%/a compounded quarterly. He would like the money to grow to $100 000.
How long will he have to wait?

14. Piet invests some money at 3.8%/a compounded quarterly for 3 years. Then she withdraws $2000 and reinvests the
remaining principal and interest at 3.6%/a compounded monthly for 5 years. At the end of this time, her
investment is worth $9002.17. How much money did Piet originally invest?

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 ID: A

Self Quiz - Financial Word Problems (Simple & Compound)

Answer Section

MULTIPLE CHOICE

1. ANS: C PTS: 1 REF: Application OBJ: 8.1 - Simple Interest

2. ANS: A PTS: 1 REF: Knowledge and Understanding
OBJ: 8.1 - Simple Interest
3. ANS: B PTS: 1 REF: Application OBJ: 8.1 - Simple Interest
4. ANS: B PTS: 1 REF: Application OBJ: 8.1 - Simple Interest
5. ANS: D PTS: 1 REF: Application OBJ: 8.2 - Compound Interest: Future Value
6. ANS: A PTS: 1 REF: Knowledge and Understanding
OBJ: 8.2 - Compound Interest: Future Value
7. ANS: D PTS: 1 REF: Application OBJ: 8.2 - Compound Interest: Future Value
8. ANS: C PTS: 1 REF: Communication
OBJ: 8.2 - Compound Interest: Future Value
9. ANS: A PTS: 1 REF: Application OBJ: 8.3 - Compound Interest: Present Value
10. ANS: B PTS: 1 REF: Application OBJ: 8.3 - Compound Interest: Present Value

SHORT ANSWER

11. ANS:
4.20%

PTS: 1 REF: Thinking OBJ: 8.3 - Compound Interest: Present Value

12. ANS:
Carol; $232.40

PTS: 1 REF: Thinking OBJ: 8.3 - Compound Interest: Present Value

13. ANS:
about 21 years

PTS: 1 REF: Thinking OBJ: 8.3 - Compound Interest: Present Value

14. ANS:
$8500

PTS: 1 REF: Thinking OBJ: 8.3 - Compound Interest: Present Value