Which Formula (Finance)

A 7.5% simple interest loan is borrowed to purchase a new car for $20,000. Which of the following is the amount of simple interest paid over 4 years?

Answer explanation

The question is only asking for the amount of interest, DO NOT add the original amount.

Tags

CCSS.HSF.BF.A.2

A 7.5% simple interest loan is borrowed to purchase a new car for $20,000. Which of the following is the total amount paid over 4 years?

Answer explanation

The question asks for the total amount. Therefore you must add the original, after calculating the amount of simple interest.

Tags

CCSS.HSF.BF.A.2

A 10% simple interest loan is borrowed to purchase a new car for $30,000. Which of the following is the amount of simple interest paid over 5 years?

Answer explanation

The question is only asking for the amount of interest, DO NOT add the original amount.

Tags

CCSS.HSF.BF.A.2

A 10% simple interest loan is borrowed to purchase a new car for $30,000. Which of the following is the total amount paid over 5 years?

Answer explanation

The question asks for the total amount. Therefore you must add the original, after calculating the amount of simple interest.

Tags

CCSS.HSF.BF.A.2

 Which of the following has the largest future value?          

a. 1,500 ฿ earning 10% simple interest for 10 years.

b. 1,000 ฿ earning 25% simple interest for 8 years.

c. 1,200 ฿ earning 20% simple interest for 8 years.

d. 1,800 ฿ earning 15% simple interest for 7 years.

Answer explanation

The question asks for the future value, this means the total in the account. Therefore you must add the original, after calculating the amount of simple interest.

Tags

CCSS.8.F.B.4

CCSS.HSF.IF.B.6

Consider £2,000 in a savings account earning 7% per annum compounding yearly. Which is the future value after 5 years?

Answer explanation

Compound Interest.

This is not an annuity because there is only a single deposit/investment.

Remember in yearly compounding k = 1, beacuse there are 1 years in a 1 year.

Consider £5,000 in a savings account earning a nominal 12% per annum compounding monthly. Which is the future value after 10 years?

Answer explanation

Compound Interest.

This is not an annuity because there is only a single deposit/investment.

Compouned monthly, K = 12, because there are 12 months in a year.

A bank is offering a savings account with interest of 12% APR compounding semi-annually. If a principal of $500 is deposited in the savings account, which is the total value of the savings account after 5 years?

Answer explanation

Compound Interest.

This is not an annuity because there is only a single deposit/investment.

Compouned semi-annually, K = 2, because there are 2 halves in 1 year.

Semi means half.

Which is the future value of an annuity with deposits of $2,000 at the end of

each year for 50 years at an interest rate of 5% compounded per annum?

Answer explanation

This question nicely has the words 'future value' and 'annuity' to help us.

It must be the annuity formula with FV, beacuse the question says 'future value'. Also because it is an investment/saving.

Remember annuity means a regular payments/investmnt.

R = Regular Payement, in this question, R = 2,000

At the end of each quarter, a 4,000 ฿ deposit is made into a retirement fund, earning nominal 8% per annum, compounded quarterly. Which is the value of fund after 30 years?