A 30-year $500,000 loan is paid off via the accumulation of a sinking fund. Sinking fund deposits are made at the beginning of each year. If the effective annual interest rate earned on the sinking fund is 10%, determine the amount in the sinking fund immediately prior to the 10th deposit.
- 37,800
- 38,700
- 39,400
- 40,300
- 41,300
References
Hlynka, Myron. "University of Windsor Old Tests 62-392 Theory of Interest". web2.uwindsor.ca. Retrieved November 23, 2023.
(Odufrey problem) The amount of principal repaid in the 3rd payment of a 5-year level payment loan at 9% is 300. What is the original loan value?
- 1,470
- 1,495
- 1,502
- 1,511
- 1,533
References
Hlynka, Myron. "University of Windsor Old Tests 62-392 Theory of Interest". web2.uwindsor.ca. Retrieved November 23, 2023.
A loan of X has an effective annual rate 8%. It is to be repaid by the end of 10 years. If the loan is repaid with a single payment at time t = 10, the total interest paid is $468.05 more than if the loan were repaid by ten equal annual payments. Find the value of X.
- 700
- 710
- 720
- 740
- 760
References
Hlynka, Myron. "University of Windsor Old Tests 62-392 Theory of Interest". web2.uwindsor.ca. Retrieved November 23, 2023.
(Chapter 2, May.2003.15) John borrows 1000 for 10 years at an annual effective interest rate of 10%. He can repay this loan using the amortization method with payments of P at the end of each year. Instead, John repays the 1000 using a sinking fund that pays an annual effective rate of 14%. The deposits to the sinking fund are equal to P minus the interest on the loan and are made at the end of each year for 10 years.
Determine the balance in the sinking fund immediately after repayment of the loan.
- 213
- 218
- 223
- 230
- 237
References
Hlynka, Myron. "University of Windsor Old Tests 62-392 Theory of Interest". web2.uwindsor.ca. Retrieved November 23, 2023.
A bank customer borrows X at an annual effective rate of 12.5% and makes level payments at the end of each year for n years.
- The interest portion of the final payment is 153.86.
- The total principal repaid as of time (n-1) is 6009.12.
- The principal repaid in the first payment is Y.
Calculate Y.
- 470
- 480
- 490
- 500
- 510
References
Hlynka, Myron. "University of Windsor Old Tests 62-392 Theory of Interest". web2.uwindsor.ca. Retrieved November 23, 2023.
A bank customer borrows X at an annual effective rate of 12.5% and makes level payments at the end of each year for n years.
- The interest portion of the final payment is 153.86.
- The total principal repaid as of time (n-1) is 6009.12.
- The principal repaid in the first payment is Y.
Calculate Y.
- 470
- 480
- 490
- 500
- 510
References
Hlynka, Myron. "University of Windsor Old Tests 62-392 Theory of Interest". web2.uwindsor.ca. Retrieved November 23, 2023.
A 35 year loan is to be repaid in equal annual installments. The amount of interest paid in the 8th installment is 135. The amount of interest paid in the 22nd installment is 108. Calculate the amount of interest in the 29th installment.
- 72
- 73
- 74
- 75
- 76
References
Hlynka, Myron. "University of Windsor Old Tests 62-392 Theory of Interest". web2.uwindsor.ca. Retrieved November 23, 2023.
(Dick London 1.12) A 10 year adjustable rate mortgage loan of 23115 is being repaid exactly with quarterly installments of 1000 based on an initial interest rate of 12% compounded quarterly. Immediately after the 12th payment, the interest rate of 12% is increased to 14% compounded quarterly. The quarterly installments remain at 1000, so the term of the loan must be different.
Calculate the loan balance immediately after the 24th payment.
- 12,000
- 12,550
- 12,950
- 13,350
- 13,750
References
Hlynka, Myron. "University of Windsor Old Tests 62-392 Theory of Interest". web2.uwindsor.ca. Retrieved November 23, 2023.
A foundation announces that it will be offering one MIT scholarship every year for an indefinite number of years. The first scholarship is to be offered exactly one year from now. When the scholarship is offered, the student will receive $20,000 annually for a period of four years, beginning from the date the scholarship is offered. This student is then expected to repay the principal amount received ($80,000) in 10 equal annual installments, interest-free, starting one year after the expiration of her scholarship. This implies that the foundation is really giving an interest-free loan under the guise of a scholarship. The current interest is 6% for all maturities and is expected to remain unchanged.
The foundation invests a lump sum to fund all future scholarships. Determine the size of the investment today.
- $421,717
- $447,020
- $452,300
- $455,220
- $457,500
References
Lo, Andrew W.; Wang, Jiang. "MIT Sloan Finance Problems and Solutions Collection Finance Theory I" (PDF). alo.mit.edu. Retrieved November 30, 2023.
You are considering buying a car worth $30,000. The dealer, who is anxious to sell the car, offers you an attractive financing package. You have to make a down-payment of $3,500, and pay the rest over 5 years with annual payments. The dealer will charge you interest at a constant annual interest rate of 2%, which may be different from the market interest rate.
The dealer offers you a second option: you pay cash, but get a $2,500 rebate. Assume that the market annual interest rate is constant at 5%. Which of the following statements is true?
- You should pay cash since this option costs $430 less
- You should pay cash since this option costs $340 less
- You should borrow since this option costs $340 less
- You should borrow since this option costs $430 less
- Both options cost the same
References
Lo, Andrew W.; Wang, Jiang. "MIT Sloan Finance Problems and Solutions Collection Finance Theory I" (PDF). alo.mit.edu. Retrieved November 30, 2023.