Applied Math 12
Personal Finance Review
Round to two decimals.
1. How much simple interest would be charged if you borrowed $3500 at 7.5% for 180 days?
180
I = 3500 X .075 X ( 365 )
I = $129.45
2. Jackie earned $35 on her investment of $1700. She invested for 3 months with simple interest. What
was her interest rate as a percent?
R=
35
(1700 𝑋
3
12
)
X 100
R = 8.24 %
3. Find the monthly payment due on a loan of $10 000 over 5 years at 4.25% if the investment is
compounded semi-annually.
N=12 X 5
I%=4.25
PV=-10 000
PMT=$185.13
FV=0
P/Y=12
C/Y=2
4. Raj wishes to double his $5000 investment. He puts it in a GIC which pays 6% compounded annually.
a) According to the Rule of 72, approximately how long will he need to double the investment?
72
6
= 12 years
b) Now, use the TVM solver to find the exact time needed for the investment to double.
N=11.9
I%=6
PV=-5000
PMT=0
FV=10 000
P/Y=1
C/Y=1
5. Tina invests $3700 at 2.8% compounded monthly for 4 years.
a) What is the value at the end of 4 years? $4137.96
b) How much interest was earned on the investment? $437.96
N=4
I%=2.8
PV=-3700
PMT=0
FV=4137.96
P/Y=1
C/Y=12
6. Eric needs $12000 for a down payment for a house that he plans to buy in 5 years. He wants to save for
the down payment by putting money in his bank account every month. His savings account earns 1.8%
compounded daily. How much would Eric need to save every month to reach his goal?
N=5 X 12
I%=1.8
PV=0
PMT=191.28
FV=12000
P/Y=12
C/Y=365
7. What rate of interest did a $2000 investment earn if it grew to $3800 in 8 years? The investment was
compounded monthly.
N=8
I%=8.05
PV=-2000
PMT=0
FV=3800
P/Y=1
C/Y=12
8. Your portfolio consists of the following 5 year GIC of $800 earning 2.25% compounded quarterly
And monthly deposits of $200 earning 1.3% compounded monthly
a) What is the value of the investment in 5 years? $13 286.64
b) Calculate the rate of return for this portfolio. 3.80 %
N=5
I%=2.25
PV=-800
PMT=0
FV=894.98
P/Y=1
C/Y=4
N=5 X 12
I%=1.3
PV=0
PMT=-200
FV=12391.66
P/Y=12
C/Y=12
9. Rikki purchased new furniture from a big box store for $3980, before taxes. She used credit and
wanted to pay off the purchase in 2 years. She was considering the following two options:
 A new credit card with an 18.9% interest rate compounded monthly. The credit card company
also offers a $500 rebate.
 A line of credit at 8.55% compounded monthly.
Which credit option should she choose? The credit card would have a lower payment and would be
cheaper overall.
Option A (credit card)
Option B (line of credit)
N=2 X 12
I%=18.9
PV=-3997.40
PMT=201.31
FV=0
P/Y=12
C/Y=12
N=24
I%=8.55
PV=-4497.40
PMT=204.54
FV=0
P/Y=12
C/Y=12
10. You have found your dream home; the price is $270 000 but you have saved up a down payment of
$14 000. You take out a mortgage for the rest at 5.25% compounded semi-annually for 25 years.
a) What will your monthly mortgage payment be? $1525.55
b) How much interest will you pay in the first 10 years? ∑Int(1,10) = $10 997.15
c) How much equity will you have in your home in the first 10 years? ∑Prn(1,10) = $4258.35 plus the
down payment of $14000 would give a total equity of $18 258.35
N=25 X 12
I%=5.25
PV=-256000
PMT=1525.55
FV=0
P/Y=12
C/Y=2