Financial Algebra Advanced Algebra with Financial Applications 2nd Edition Robert Gerver Richard J Sgroi- Test Bank
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Sample Test
Chapter_03___Consumer_Credit_
1. A
debit card is a type of charge card of which the monthly bill must be paid in
full.
2.
True
3.
False
ANSWER:
False
RATIONALE: A
debit card is not a credit card or charge card. It acts like an electronic
check by which money is deducted from your checking account each time you use
it.
POINTS:
1
QUESTION TYPE:
True / False
HAS VARIABLES: False
DATE CREATED: 1/26/2017 3:33 AM
DATE MODIFIED:
2/13/2017 1:20 AM
2. Last
month, the ending balance on Maryanne’s MasterCard was $1,789, the average
daily balance was $755, and the monthly periodic rate is 1.85%. Her finance
charge can be calculated by multiplying the ending balance times the monthly
periodic rate. So the finance charge is $1,789 ´ 0.0185 = $33.10.
3.
True
4.
False
ANSWER:
False
RATIONALE: The
finance charge can be found by multiplying the average daily balance times the
monthly periodic rate. Maryanne’s finance charge is $755 × 0.0185 = $13.97.
POINTS:
1
QUESTION TYPE:
True / False
HAS VARIABLES: False
DATE CREATED: 1/26/2017 3:35 AM
DATE MODIFIED:
2/13/2017 1:22 AM
3. Taneeka
borrowed $12,000 for a car for 6 years at an APR of 7.25%. Her monthly payment
will be $206.03.
4.
True
5.
False
ANSWER:
True
RATIONALE:
POINTS:
1
QUESTION TYPE:
True / False
HAS VARIABLES: False
DATE CREATED: 1/26/2017 3:55 AM
DATE MODIFIED:
2/13/2017 1:25 AM
4. Interest
can be the money paid by a bank to a consumer as compensation for keeping his
or her money in that bank. Interest can also be the money paid to a bank for
the use of its money.
5.
True
6.
False
ANSWER:
True
POINTS:
1
QUESTION TYPE:
True / False
HAS VARIABLES: False
DATE CREATED: 1/26/2017 4:02 AM
DATE MODIFIED:
2/13/2017 1:25 AM
5. The
Truth-in-Lending Act protects consumers from harassment from creditors.
6.
True
7.
False
ANSWER:
False
RATIONALE: The
Fair Debt Collection Practices Act protects consumers from harassment and
unfair collection practices.
POINTS:
1
QUESTION TYPE:
True / False
HAS VARIABLES: False
DATE CREATED: 1/26/2017 4:03 AM
DATE MODIFIED:
2/13/2017 1:26 AM
6. A
FICO score is named after its creator, Fair, Isaac, and Company. It summarizes
the probability that a person with debt will repay that debt.
7.
True
8.
False
ANSWER:
True
POINTS:
1
QUESTION TYPE:
True / False
HAS VARIABLES: False
DATE CREATED: 1/26/2017 4:04 AM
DATE MODIFIED:
2/13/2017 1:27 AM
7. FICO
scores range from 300 to about 850. A score above 770 is excellent, a score
above 700 is good, and a score below 600 is considered a credit risk.
8.
True
9.
False
ANSWER:
True
POINTS:
1
QUESTION TYPE:
True / False
HAS VARIABLES: False
DATE CREATED: 1/26/2017 4:05 AM
DATE MODIFIED:
2/13/2017 1:27 AM
8. The
total interest on a 5 year 5.2% loan with a principal of $10,000 is 10,000 ´ 0.052 ´ 5 = $2,600.
9.
True
10.
False
ANSWER:
False
RATIONALE: Find
the monthly payment, multiply it by the number of months of the loan, and then
subtract the principal.
POINTS:
1
QUESTION TYPE:
True / False
HAS VARIABLES: False
DATE CREATED: 1/26/2017 4:06 AM
DATE MODIFIED:
2/13/2017 1:32 AM
9. Max
found a car he wants to buy that costs $16,000. He can afford to pay $250 a
month for the car. His bank offers him a car loan of 7.3%. The length of his
loan should be about 5 years, so he can afford the payments.
10.
True
11.
False
ANSWER:
False
RATIONALE: The
length of the loan will be about 7 years.
POINTS:
1
QUESTION TYPE:
True / False
HAS VARIABLES: False
DATE CREATED: 1/26/2017 4:11 AM
DATE MODIFIED:
2/13/2017 1:35 AM
10.
Regina pays her credit card balance in full each month. Last
month her average daily balance was $345 and the APR is 11.2%. The finance
charge on her current month’s statement is $13.22.
11.
True
12.
False
ANSWER:
False
RATIONALE: When
the balance is paid in full, there is no finance charge.
POINTS:
1
QUESTION TYPE:
True / False
HAS VARIABLES: False
DATE CREATED: 1/26/2017 4:14 AM
DATE MODIFIED:
2/13/2017 1:37 AM
11.
Use the summary section of the monthly credit card statement
below to calculate the finance charge.
33.
$33.54 b.
$12.98
34.
$10.06 d.
$9.38
ANSWER:
c
RATIONALE: 805
× 0.0125 = $10.06
POINTS:
1
QUESTION TYPE:
Multiple Choice
HAS VARIABLES: False
DATE CREATED: 1/27/2017 7:10 AM
DATE MODIFIED:
2/13/2017 1:41 AM
12.
Jerry buys a $2,700 motorcycle on a deferred payment plan. There
is no down payment and no interest for 18 months. Jerry must make a minimum
payment of $75 a month. To avoid a retroactive APR of 21%, he must pay the
balance in full before the 18 months has passed. If he pays $75 each month, how
much should he pay the last month to avoid the interest charges?
13.
$1,350 b.
$1,425
14.
$1,500 d.
$2,075
ANSWER:
b
RATIONALE:
$1,425; 17 × 75 = 1,275; 2,700 – 1,275 = $1,425
POINTS:
1
QUESTION TYPE:
Multiple Choice
HAS VARIABLES: False
DATE CREATED: 1/28/2017 2:07 AM
DATE MODIFIED:
2/13/2017 1:47 AM
13.
Mantago wants to borrow $10,000 to buy a used car. He examined
his budget and decided that he can afford a payment of $200 a month. If his
bank offers him an APR of 7.5%, how long should he borrow the money so he can
afford his monthly payment?
14.
3.5 years b.
4 years
15.
4.5 years d.
5 years
ANSWER:
d
RATIONALE:
POINTS:
1
QUESTION TYPE:
Multiple Choice
HAS VARIABLES: False
DATE CREATED: 1/28/2017 2:10 AM
DATE MODIFIED:
2/13/2017 1:49 AM
14.
Lisa made this spreadsheet to compare her options when she
decided to purchase a living room set on an installment plan.
What spreadsheet formula should she input into F2?
1.
E2 – A2 – B2 b.
A2 – E2 + B2
2.
E2 – A2 d.
E2 + A2
ANSWER:
a
RATIONALE:
Finances charges are the total of the monthly payment, minus the down payment
and the purchase price.
POINTS:
1
QUESTION TYPE:
Multiple Choice
HAS VARIABLES: False
DATE CREATED: 1/28/2017 2:13 AM
DATE MODIFIED:
2/13/2017 1:52 AM
15.
Isabella wants to purchase a new refrigerator. When she applies
for an installment loan at the appliance store, her loan application is turned
down. What consumer law says that a lender must give her the reason, in
writing, that she was denied the loan?
16.
Truth-in-Lending
Act b.
Equal
Opportunity Act
17.
Fair Credit Reporting Act d.
Fair Debt
Collection Practices Act
ANSWER:
c
POINTS:
1
QUESTION TYPE:
Multiple Choice
HAS VARIABLES: False
DATE CREATED: 1/28/2017 3:30 AM
DATE MODIFIED:
2/13/2017 1:53 AM
16.
Yanni received her monthly credit card statement in the mail,
the summary of which is shown below. When she calculated the new balance for
the month, she arrived at a different amount than the credit card company. What
should be the correct new balance?
576.
$3,576.28
b. $3,676.28
577.
$3,766.28
d. $3,776.28
ANSWER:
d
RATIONALE:
Finance charges should be (21% ÷ 12) for a monthly periodic rate of 1.75%.
$3,558.71 × 0.0175 = $62.28; $82.28 – $62.28 = 20.00; the
finance charge is $20 too high.
So the new balance should be $3,796.28 – $20 = $3,776.28.
POINTS:
1
QUESTION TYPE:
Multiple Choice
HAS VARIABLES: False
DATE CREATED: 1/28/2017 3:31 AM
DATE MODIFIED:
2/13/2017 1:59 AM
17.
Dr. Drake is thinking about retirement and decides to sail
around the world once he retires. He buys a sailboat for $125,000. He borrows
the money at an APR of 7.5% for five years. How much will his total interest
be?
18.
$46,875.30
b.
$36,875.40
19.
$25,284.40
d.
$17,388.80
ANSWER:
c
RATIONALE:
POINTS:
1
QUESTION TYPE:
Multiple Choice
HAS VARIABLES: False
DATE CREATED: 1/28/2017 3:38 AM
DATE MODIFIED:
2/13/2017 2:03 AM
18.
Jackson and Kate Jones do not pay their credit card in full each
month, so they incur finance charges. On their last credit card statement, the
average daily balance is $875, and the monthly periodic rate is 2.25%. What
should be the finance charge on the statement?
19.
$19.69 b.
$20.25
20.
$87.50 d.
$196.88
ANSWER:
a
RATIONALE: 875
× 0.0225 ≈ 19.69
POINTS:
1
QUESTION TYPE:
Multiple Choice
HAS VARIABLES: False
DATE CREATED: 1/28/2017 4:29 AM
DATE MODIFIED:
2/13/2017 2:05 AM
19.
What is the monthly periodic rate on a loan with an APR of
18.6%?
20.
0.62% b.
0.93%
21.
1.55% d.
1.86%
ANSWER:
c
RATIONALE: 18.6
÷ 12 = 1.55
POINTS:
1
QUESTION TYPE:
Multiple Choice
HAS VARIABLES: False
DATE CREATED: 1/28/2017 4:32 AM
DATE MODIFIED:
2/13/2017 2:06 AM
20.
Two consumers borrowed $10,000 for 5 years. Bob has a credit
score of 650 and has an interest rate of 11.5%, whereas Tyree has a credit
score of 710 and has an interest rate of 8.0%. What will be the total
difference between what the two men pay?
21.
$1,030.20
b. $2,165.40
22.
$2,195.60
d. $3,195.80
ANSWER:
a
RATIONALE:
POINTS:
1
QUESTION TYPE:
Multiple Choice
HAS VARIABLES: False
DATE CREATED: 1/28/2017 4:33 AM
DATE MODIFIED:
2/13/2017 2:12 AM
21.
How does a credit card company calculate finance charges on a
credit card?
ANSWER:
Finance charges are based on the average amount the consumer owes each day of
the billing cycle. To calculate the charge, multiply the average daily balance
by the monthly periodic rate, which is the APR (yearly interest rate) divided
by 12.
POINTS:
1
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES: False
DATE CREATED: 1/28/2017 4:41 AM
DATE MODIFIED:
2/13/2017 2:13 AM
22.
Jim wants to buy a computer. The total cost is $1,180. If he can
save $60 a month, how long will it take for him to save up for the computer?
ANSWER:
About
20 months; 1,180 ÷ 60 ≈ 19.67
POINTS:
1
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES: False
DATE CREATED: 1/28/2017 4:42 AM
DATE MODIFIED:
2/13/2017 2:14 AM
23.
Rick carries a balance on his credit card each month. Today is
the first day of the new, 28-day billing cycle. The current balance is $2,360
and the APR is 21%. Rick is buying a friend an expensive gift that costs $1,500
that he plans to put on his credit card. This will be his only purchase this
month. How much in finance charges can he save by making the purchase on the
last day of the billing cycle versus the first day of the billing cycle?
ANSWER:
First
day of cycle: (2,360 + 1,500) ´
(0.21 ÷ 12) = 67.55
Last day of cycle: (2,360 ´ 27)
+ 3,860 = 67,580 ÷ 28 = 2,413.57
2,413.57 ´
(0.21 ÷ 12) = 42.24
67.55 − 42.24 = $25.31
He can save $25.31 by waiting to charge the $1,500 gift until
the last day.
POINTS:
1
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES: False
DATE CREATED: 1/28/2017 4:44 AM
DATE MODIFIED:
2/13/2017 2:15 AM
24.
Trey is taking out a loan for $85,000. It is a 20-year loan with
an APR of 5.85% What will his monthly payment be?
ANSWER:
POINTS:
1
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES: False
DATE CREATED: 1/28/2017 4:46 AM
DATE MODIFIED:
2/13/2017 2:16 AM
25.
According to the credit calendar below, what is the average
daily balance?
ANSWER:
$713.50; Add all the daily balances and divide by the number of days in the
billing cycle, 30.
(640 ´ 8) +
(765 ´ 5) +
(820 ´ 3) +
(720 ´ 14)
= 21,485 ÷ 30 = $716.17
POINTS:
1
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES: False
DATE CREATED: 1/28/2017 4:52 AM
DATE MODIFIED:
2/13/2017 2:22 AM
26.
Loretta was on vacation when her wallet was stolen. By the time
she reported her three credit cards missing, the criminal had charged over
$10,000 on each card. How much of this will Loretta have to pay?
ANSWER:
$150;
$50 per card
POINTS:
1
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES: False
DATE CREATED: 1/28/2017 4:53 AM
DATE MODIFIED:
2/13/2017 2:24 AM
27.
Miriam and Dave want to borrow $25,000 to put an addition on
their house. They went over their budget, and they can afford to pay $450 a
month. If the bank offers them a home improvement loan with an APR of 6.3%,
what should the length of the loan be so they can afford the monthly payments?
ANSWER:
The
length of the loan will be about 5.5 years.
POINTS:
1
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES: False
DATE CREATED: 1/28/2017 4:55 AM
DATE MODIFIED:
2/13/2017 2:27 AM
28.
Malika has a credit card balance of $321. Her available credit
on this card is $4,679. What is her credit line on this card?
ANSWER:
$5,000; 4,679 + $321 = 5,000
POINTS:
1
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES: False
DATE CREATED: 1/28/2017 4:57 AM
DATE MODIFIED:
2/13/2017 2:28 AM
29.
Yoshi carries a balance on her credit card each month. In May,
she decides she wants to use her card to buy a new dishwasher. In which part of
the billing cycle should she make her purchase to keep her finance charges to
the minimum?
ANSWER:
She
should make the purchase later in the billing cycle to keep her average daily
balance lower, thus lowering her finance charges.
POINTS:
1
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES: False
DATE CREATED: 1/28/2017 5:00 AM
DATE MODIFIED:
2/13/2017 2:29 AM
30.
Jamal is going to borrow $14,000 from his credit union to buy a
used car. The APR is 7.0% and the length of the loan is 4 years. How much will
Jamal pay in interest?
ANSWER:
Find
the monthly payment, multiply it by the number of months of the loan, and then
subtract the principal.
POINTS:
1
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES: False
DATE CREATED: 1/28/2017 5:01 AM
DATE MODIFIED:
2/13/2017 2:31 AM
31.
Cedric purchased a new refrigerator and stove at Home Depot for
$3,729 on a deferred payment plan with no down payment and no payment at all
for six months. If the entire $3,729 is paid in full before three months is up,
there is no interest. If it is not paid in full within the six months, there is
a finance charge with an APR of 25.4% applied each month going back to the
first month. If Cedric makes the full payment a week after the six months
expired, what is the finance charge?
ANSWER:
Find
the finance charge on the first month by multiplying 3,729 by the monthly
interest rate and adding it to the existing balance. Find the finance
charge for the second and third months similarly.
POINTS:
1
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES: False
DATE CREATED: 1/28/2017 5:05 AM
DATE MODIFIED:
2/13/2017 4:02 AM
32.
Shania bought a $1,972 drum set on the installment plan. The
installment agreement included a 20% down payment and 36 monthly payments of
$52.04 each. What is the finance charge?
ANSWER:
Find
the finance charge by multiplying the monthly payment by 36 and adding the down
payment to get the total amount for the drum set. Then subtract the cost of the
drum set.
POINTS:
1
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES: False
DATE CREATED: 1/28/2017 5:15 AM
DATE MODIFIED:
2/13/2017 4:03 AM
33.
Arnold purchased a $1,300 set of golf clubs on a nine-month
layaway plan and had to pay a monthly payment of $158.89. What is the fee
charged for the layaway plan?
ANSWER:
Find
the layaway fee by multiplying the monthly payment by 9. Then subtract the cost
of the golf clubs.
POINTS:
1
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES: False
DATE CREATED: 1/28/2017 5:18 AM
DATE MODIFIED:
2/13/2017 4:03 AM
34.
Garth had unexpected expenses this month and didn’t have enough
in his saving account to pay the rent of $600. He went to Loanshark Larry’s to
borrow the money until his next paycheck 15 days from now. Larry charges $100
interest for the 15 days. What is the APR for this payday loan?
ANSWER:
Find
the APR by using the formula for Payday APR.
POINTS:
1
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES: False
DATE CREATED: 1/28/2017 5:20 AM
DATE MODIFIED:
2/13/2017 4:04 AM
35.
Kenise will begin college as a freshman next fall and has
received a 10-year $5,500 Federal Direct Unsubsidized Loan with an interest
rate of 6.8%. She will be required to begin making payments six months after
graduation. How much interest will accrue while she is still in school and over
the six-month grace period?
ANSWER:
Find
the interest by using the simple interest formula for the 4 years plus
six-month grace period.
POINTS:
1
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES: False
DATE CREATED: 1/28/2017 5:24 AM
DATE MODIFIED:
2/13/2017 4:06 AM
36.
Rhett is about to begin college and has received a 10-year
$7,500 Federal Direct Unsubsidized Loan with an interest rate of 6.4%. He will
be required to begin making payments six months after graduation. If Rhett
decides to capitalize the interest accrued from the time he receives the funds
until he begins making payment, how much total interest would he pay on this
loan?
ANSWER:
Find
the capitalized interest by using the simple interest formula for the 4 years
plus six-month grace period and add that amount to the loan amount of 7,500.
Then determine the monthly payment for the capitalized loan amount and multiply
that payment by 120 payments. The total interest will be the difference in the
total payments and the original loan amount.
POINTS:
1
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES: False
DATE CREATED: 1/28/2017 5:26 AM
DATE MODIFIED:
2/13/2017 4:06 AM
37.
George wants to borrow $30,000 to purchase a car. After looking
at a monthly budget he realizes that all he can afford to pay per month is
$350. The dealership is offering a 4.77% loan. When George hears how much
interest he will pay over the life of the loan, he decides to cut back on his
entertainment expenses and pay $400 per month. How much in interest will George
save by paying an extra $50 per month? Hint: Round any loan length calculations
to the nearest quarter of a year.
ANSWER:
Find
the length of the loan with a $350 payment. Multiply the monthly payment by the
length of the loan in months and subtract the purchase price from the total
payment amount. Do the same for the loan with a $400 payment and subtract the
two results.
POINTS:
1
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES: False
DATE CREATED: 1/28/2017 5:55 AM
DATE MODIFIED:
2/13/2017 4:10 AM
38.
Asa’s most recent credit card statement had a balance of
$2,622.77. The minimum payment warning box indicates that it will take 12 years
to pay off the card if he makes the minimum payment of $28 per month. If he
makes a monthly payment of $100, it will take 3 years to pay off the balance.
What will be the percent increase in total payments if Asa only pays the
minimum rather than the $100 per month?
ANSWER:
Multiply the monthly payment by the time required in months to pay off the
credit card. Then use the total payments for the $100-per-month option as the
basis of comparison in the percent increase formula.
POINTS:
1
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES: False
DATE CREATED: 1/28/2017 6:01 AM
DATE MODIFIED:
2/13/2017 4:13 AM
|
Chapter_05___Employment_Basics_ 1. Employers are usually charged a flat fee to place
classified ads in the newspaper.
|
|
2. Social Security tax is paid on
all your income, whereas Medicare tax is paid up to the maximum taxable income
amount.
|
|
3. Blinko’s charges $24.99 to
print 100 top-quality, single-page résumés. Each additional 50 copies cost
$10. This cost, r(x), written as a piecewise
function, is:
|
|
4. The purpose of worker’s compensation
is to offer benefits to eligible employees that have become unemployed.
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|
5. Bruce is paid semimonthly, so
he receives 24 paychecks a year.
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|
6. McKenzie sells textbooks. She
receives 7% on her first $1,000 in sales and 15% on the balance of her sales.
If her sales in one month were $14,500, she would earn $2,025 in commission.
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|
7. Jim was offered a job as a
computer programmer making $65,000 per year. Another company offered Jim a
position earning $1,200 a week. The job with the $65,000 salary pays more.
|
|
8. Royalty is a percentage paid on
the money earned from sales on items such as tickets, books, artwork, and music
CDs.
|
|
9. Cherie accepted a job through
an employment agency. The job pays $1,100 a week. The agency charges 30% of
her first 4 weeks, pay. To find the amount she owes the agency, she should
multiply her first four weeks’ salary by 0.03.
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