Question 1

A woman takes out a loan to be paid back over 4 years at j12 = 6% with monthly payments of 281.82.After 14 payments,the outstanding balance on the loan is $8791.53.She then misses the next 4 payments (from time 15 to 18).She begins making regular monthly payments at time 19.If she still wants to pay back her loan in full by the end of 4 years,what is the size of her new monthly payment?

Accepted Answer

A) $324.30 
B) $321.08 
C) $322.68 
D) $311.48

Question 2

A woman takes out a loan to be paid back over 4 years at j12 = 6% with monthly payments of $281.82.After 14 payments,the outstanding balance on the loan is $8791.53.The woman then misses the next 3 payments (from time 15 to 17).She begins making regular monthly payments at time 18.If she still intends to pay back her loan in full by the end of 4 years,what is the size of her new monthly payment? (she has 31 payments left)

Accepted Answer

A) $306.85 
B) $308.39 
C) $311.48 
D) $313.03

Question 3

What is the interest portion of the third (3rd)payment?

Accepted Answer

A) $129.44 
B) $136.40 
C) $156.85 
D) $470.56

Question 4

A woman takes out a loan to be paid back over 4 years at j12 = 6% with monthly payments of 281.82.After 14 payments,the outstanding balance on the loan is $8791.53.She then misses the next 4 payments (from time 15 to 18).She begins making regular monthly payments at time 19.If she still wants to pay back her loan in full by the end of 4 years,what is the size of her new monthly payment?

Accepted Answer

A) $311.48 
B) $321.08 
C) $322.68 
D) $324.30

Question 5

A loan of $12,000 is being repaid over 5-years with the following payment history:
• &#61472;Quarterly payments of $769.77 for the first two years at j4 = 10%
• &#61472;Loan refinanced at j4 = 8%,with quarterly payments dropping to $746.65 for one year
• &#61472;Loan refinanced again,this time at j4 = 6%
What is the outstanding balance of the loan at this point in time (after 3 years,with 8 payments remaining)?

Accepted Answer

A) $5469.57 
B) $5589.37 
C) $5638.94 
D) $6023.86

Question 6

A 5-year $6000 loan is to be repaid with monthly payments of $115.99 at j12 = 6%.Just after making the 30th payment,the borrower has the balance refinanced at j12 = 3% with the term of the loan to remain unchanged.If the balance is determined by the sum-of-digits method,what will be the new monthly payment?

Accepted Answer

A) $121.30 
B) $118.20 
C) $115.99 
D) $112.09

Question 7

A city borrows $1,000,000 at j2 = 9.5%.They pay off this loan over eight years using the sinking fund method.The sinking fund interest rate is j2 = 8%.What is the book value of the debt after 5 years? (loan interest and sinking fund deposits are made semi-annually; (Answer to the nearest dollar)

Accepted Answer

A) $429,710 
B) $449,880 
C) $463,738 
D) $482,113

Question 8

A city issues $100,000 worth of bonds,redeemable at par and paying interest at j2 = 7%.A sinking fund,earning j2 = 11%,is created to pay for the redemption of the bonds.The semi-annual cost of the debt is $6367.93.What is the book value of the debt at the end of 6 years?

Accepted Answer

A) $53,007.27 
B) $80,245.55 
C) $46,992.73 
D) $23,584.84

Question 9

A $500,000 loan can be amortized over 15 years with annual payments of $58,414.77 at j1 = 8% (option A).Alternatively,$500,000 can be borrowed at j1 = x%,with interest paid at the end of each year and the principal repaid with one lump sum at the end of 15 years (option B).For option B,a sinking fund can be set up earning j1 = 6%.What is the value of x% such that the annual expense under the two options is the same?

Accepted Answer

A) 7.39% 
B) 7.26% 
C) 7.05% 
D) 6.92%

Question 10

A company borrows $100,000 with interest at j12 = 9%.The loan is to be amortized by 88 monthly payments of $1550,plus a final smaller payment.What is the outstanding balance after 40 payments have been made?

Accepted Answer

A) $63,361.21 
B) $62,842.79 
C) $62,286.41 
D) $28,007.93

Question 11

A corporation takes out a loan of $A,to be paid back over 12 years using the sinking fund method.The interest rate on the loan is j4 = 8%,while the sinking fund earns j4 = 7%.The quarterly expense of debt is $6,509.08.What is the value of A? (Answer to the nearest dollar)

Accepted Answer

A) $194,500 
B) $199,654 
C) $210,209 
D) $216,235

Question 12

A loan is being amortized with 20 annual payments of principal and interest.The principal repaid in the 13th payment is $801.45 and the interest portion of the 13th payment is $698.55.What is the effective annual rate of interest,j1 being charged on this loan?

Accepted Answer

A) 11.01% 
B) 10.02% 
C) 9.37% 
D) 8.15%

Question 13

A house is purchased with a down payment of $25,000 with the remaining $175,000 financed through a mortgage at j12 = 9% with monthly payments of $1500 for as long as necessary.What is the seller's equity after 15 years (180 payments)?

Accepted Answer

A) $118,413 
B) $104,049 
C) $95,951 
D) $70,951

Question 14

A loan of $200,000 can be amortized over 10 years at j1 = 13% (option 1).Alternatively,the money can be borrowed at j1 = y%,with interest paid at the end of each year and the original loan repaid with one lump sum at the end of 10 years (option 2).For option 2,a sinking fund can be set up earning j1 = 9%.What is the value of y such that the annual expense under the two options is the same?

Accepted Answer

A) Less than 10.5% 
B) 10.5% or more,but less than 11% 
C) 11% or more,but less than 11.5% 
D) 11.5% or more

Question 15

A loan is being repaid over 8 years with 32 quarterly payments of $362.19 at j4 = 8%.If the total amount of interest paid over the life of the loan is $3090.08,what is the outstanding balance of the loan immediately after the 18th payment using the sum-of-digits method?

Accepted Answer

A) $4982.87 
B) $4456.16 
C) $4384.76 
D) $4069.90

Question 16

A company has borrowed $A and has agreed to pay interest on the loan every 3-months at j4 = 8% and pay back the $A in one lump sum at the end of 11 years.The company will make quarterly deposits in a sinking fund earning j4 = 4% to accumulate to $A by the end of 11 years.If the book value of the loan after 5 years is $81,485,what is the value of A? (Answer to the nearest $100)

Accepted Answer

A) $114,100 
B) $119,300 
C) $125,300 
D) $136,000

Question 17

A loan at j12 = 6%,is being repaid with monthly payments of $154.66 for 5 years using the sum of digits method.The total interest over the life of the loan is $1279.60.What is the outstanding balance of the loan after 2 years?

Accepted Answer

A) $5083.83 
B) $5102.07 
C) $5357.99 
D) $5567.76

Question 18

A corporation takes out a $100,000 loan to be repaid over 6-years with quarterly payments at j4 = 10%.Under the amortization method,the outstanding balance of the loan after 4 years is $40,090.26.At this time the company refinances the loan,without penalty.The new loan rate is j4 = 8% and the company makes an additional lump sum payment of $5000.What is the new quarterly payment,assuming the loan is still paid back in full after 6 years?

Accepted Answer

A) $4790.16 
B) $4893.95 
C) $5472.71 
D) $5591.28

Question 19

A loan is being repaid with level annual payments of $1040 on July 30th of each year.The last $1040 loan payment is to be made on July 30,2015 and the interest portion of this final payment is $40.What is the principal portion of the payment made on July 30,2010?

Accepted Answer

A) $821.93 
B) $828.03 
C) $854.80 
D) $863.84

Question 20

A corporation takes out a $100,000 loan to be repaid over 6-years with quarterly payments at j4 = 10%.The total interest to be paid on the loan over the 6 years is $34,190.77.Using the sum of digits method,the outstanding balance of the loan immediately after the 16th payment is $40,627.40.How much of the 17th payment goes towards interest using the sum of digits method?

Accepted Answer

A) $1218.82 
B) $1025.72 
C) $1015.69 
D) $911.75

Exam 5: Repayment of Debts

What is the interest portion of the third (3^rd) payment?

A city borrows $1,000,000 at j₂ = 9.5%.They pay off this loan over eight years using the sinking fund method.The sinking fund interest rate is j₂ = 8%.What is the book value of the debt after 5 years? (loan interest and sinking fund deposits are made semi-annually; (Answer to the nearest dollar)

A city issues $100,000 worth of bonds,redeemable at par and paying interest at j₂ = 7%.A sinking fund,earning j₂ = 11%,is created to pay for the redemption of the bonds.The semi-annual cost of the debt is $6367.93.What is the book value of the debt at the end of 6 years?

A company borrows $100,000 with interest at j₁₂ = 9%.The loan is to be amortized by 88 monthly payments of $1550,plus a final smaller payment.What is the outstanding balance after 40 payments have been made?

A corporation takes out a loan of $A,to be paid back over 12 years using the sinking fund method.The interest rate on the loan is j₄ = 8%,while the sinking fund earns j₄ = 7%.The quarterly expense of debt is $6,509.08.What is the value of A? (Answer to the nearest dollar)

A loan is being amortized with 20 annual payments of principal and interest.The principal repaid in the 13^th payment is $801.45 and the interest portion of the 13^th payment is $698.55.What is the effective annual rate of interest,j₁ being charged on this loan?

A house is purchased with a down payment of $25,000 with the remaining $175,000 financed through a mortgage at j₁₂ = 9% with monthly payments of $1500 for as long as necessary.What is the seller's equity after 15 years (180 payments) ?

A loan is being repaid over 8 years with 32 quarterly payments of $362.19 at j₄ = 8%.If the total amount of interest paid over the life of the loan is $3090.08,what is the outstanding balance of the loan immediately after the 18^th payment using the sum-of-digits method?

A loan at j₁₂ = 6%,is being repaid with monthly payments of $154.66 for 5 years using the sum of digits method.The total interest over the life of the loan is $1279.60.What is the outstanding balance of the loan after 2 years?

A loan is being repaid with level annual payments of $1040 on July 30^th of each year.The last $1040 loan payment is to be made on July 30,2015 and the interest portion of this final payment is $40.What is the principal portion of the payment made on July 30,2010?