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1. You are going to borrow money to buy a boat. If you can get a 3-year loan at 4.7% compounded monthly and can afford monthly payments of $400, how much can you borrow? (Assume this problem involves an ordinary annuity.) Note: This problem is continued in problem #2.

   1.   ?    $13406.45
   2.   ?    $1190.66
   3.   ?    $15432.26
   4.   ?    None of the answers given; click to see the solution.

2. You are going to borrow money to buy a boat. If you can get a 3-year loan at 4.7% compounded monthly and can afford monthly payments of $400, how much interest will be paid on the loan? Note: This problem is a continuation of problem #1.

   1.   ?    $993.55
   2.   ?    $13006.45
   3.   ?    $1890.31
   4.   ?    None of the answers given; click to see the solution.

3. A family is going to purchase a home costing $350,000. They must pay 20% down, and the rest is to be amortized over 30 years in equal monthly payments. If they obtain a loan at 5.3% compounded monthly, what will their monthly payment be? (Assume this problem involves an ordinary annuity.)

   1.   ?    $1554.85
   2.   ?    $1943.57
   3.   ?    $9985.88
   4.   ?    $318.19
   5.   ?    None of the answers given; click to see the solution.

4. Suppose you have just won a lottery of $1,000,000. If the money is invested in an ordinary annuity that earns 5.1% compounded annually, how many annual payments of $80,000 will you receive from the account?

   1.   ?    20
   2.   ?    10
   3.   ?    -10
   4.   ?    None of the answers given; click to see the solution.

5. An ordinary annuity contains $400,000. Withdrawals of $9453 are made quarterly for 15 years. At the end of that time, the annuity contains no money. What annual nominal compounding rate was used?

   1.   ?    4.9%
   2.   ?    43.3%
   3.   ?    10.8%
   4.   ?    5%
   5.   ?    None of the answers given; click to see the solution.

6. If the monthly payment on a home mortgage of $220,000 made at 5.9% compounded monthly is $1404.05 for 25 years, how much interest is paid over the life of the loan?

   1.   ?    $201,215
   2.   ?    $324,500
   3.   ?    $184,898.75
   4.   ?    None of the answers given; click to see the solution.

7. A credit card balance of $2000 is being paid off with monthly payments of $100. The interest rate is 1.5% per month. What is the unpaid balance after the first monthly payment is made?

   1.   ?    $1930
   2.   ?    $1900
   3.   ?    $1901.50
   4.   ?    None of the answers given; click to see the solution.