Section 4-2 Quiz

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Section 4-2 Quiz

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1. A fairly good estimate for a long-term loan with a moderate or high interest rate is that the monthly payment is _______________ as large as the principal times the monthly interest rate.

at most

at least

half

twice

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2. For short-term loans, the monthly payment is at least the amount we would pay each month if no interest were charged.

True

False

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3. If you borrow money to pay for an item, your _______________ in that item at a given time is the part of the principal you have paid.

investment

amortization

equity

interest

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4. For long-term loans, the monthly payment is at most as large as the principal times the monthly interest rate as a decimal.

True

False

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5. To buy a car, you borrow $25,000 with a term of three years at an APR of 6.5%. What is your monthly payment?

$250.65

$766.23

$162.50

$487.50

Clear selection

6. The going rate for a home mortgage with a term of 30 years is 6%. The lending agency says that based on your income, your monthly payment can be at most $900. How much can you borrow?

$324,000.00

$239,504.78

$115,307.63

$150,112.45

Clear selection

7. A car dealer offers you a loan with no interest charged for the term of three years. If you need to borrow $15,000, what will your monthly payment be?

$416.67

$450.00

$500.00

$375.00

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8. Assume you take out a $5000 loan for 24 months at 7.5% APR. How much of the first month's payment is interest?

$62.50

$31.25

$15.63

$32.00

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9. Suppose you buy a two-year $7500 CD at an APR of 6.75% compounded monthly. How much interest will you be paid by the end of the period?

$8580.78

$1012.50

$1080.78

$858.08

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10. Suppose you want to borrow a principal of $27,000 for a term of 36 months. Then the monthly payment would be at least:

$810

$750

$900

$667

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11. It is very common for a home mortgage to last as long as:

20 years

30 years

40 years

50 years

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12. Find the interest paid on a 30-year mortgage of $350,000 at an APR of 6%.

$405,434.80

$280,000.00

$755,434.80

$531,010.00

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13. A(n) _______________ mortgage keeps the same interest rate over the life of the loan.

adjustable-rate

variable-rate

fixed-rate

prime-rate

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14. Suppose you want to borrow a principal of $450,000 for a term of 25 years at an APR of 5.5%. Then the monthly payment would be at least:

$2062.50

$2475.00

$1500.00

$990.00

Clear selection

15. You want to borrow $300,000 for a 30-year home mortgage and have found an APR of 5.75% for an adjustable-rate mortgage. What would your initial monthly payment be for this loan?

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