Practical Business Math Procedures 11th Edition Slater Test Bank

Practical Business Math Procedures
11th edition Slater Test Bank

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10
Student: ___________________________________________________________________________
1. The interest is the amount of money borrowed.

True False
2. The time of a loan could be expressed in months, years, or days.
True False
3. The amount a bank charges for the use of money is called interest.
True False
4. Simple interest loans are usually more than one year.
True False
5. Interest = principal × rate.
True False
6. 18 months is the same as 1.5 years.
True False
7. The exact interest method represents time as the exact number of days divided by 365.
True False
8. The federal government likes to use ordinary interest.
True False
9. July 10 to March 15 is 119 days.
True False
10. Ordinary interest is never used by banks.
True False
11. Ordinary interest results in a slightly higher rate of interest than exact interest.
True False
12. The U.S. Rule is seldom used in today's workplace.
True False
13. Principal is equal to rate divided by interest times time.
True False
14. Rate is equal to interest divided by the principal times time.
True False
15. To convert time in days, it is necessary to multiply the time in years times 360 or 365.
True False
16. The U.S. Rule is a method that allows the borrower to receive proper interest credit when a debt is paid
off in more than one payment before the maturity date.
True False
17. In the U.S. Rule, the first step is to calculate interest on the total life of the loan.
True False
18. In the U.S. Rule, the partial payment first covers the interest and the remainder reduces the principal.
True False
19. Ordinary interest is required by all banks.
True False
20. Interest is the cost of borrowing.
True False
21. In calculating interest in the U.S. Rule from the last partial payment, the interest is subtracted from the
adjusted balance.
True False
22. Interest is equal to:
A. Principal × rate divided by time
B. Principal divided by rate × time
C. Principal × time
D. Principal × rate × time
E. None of these
23. The amount charged for the use of a bank's money is called:
A. Principal
B. Interest
C. Rate
D. Time
E. None of these
24. Simple interest usually represents a loan of:
A. One month or less
B. One year or less
C. Two years or less
D. Six months or less
E. None of these
25. Federal Reserve banks as well as the federal government like to calculate simple interest based on:
A. Exact interest, ordinary interest
B. Using 30 days in each month
C. Using 31 days in each month
D. Exact interest
E. None of these
26. A note dated August 18 and due on March 9 runs for exactly:
A. 230 days
B. 227 days
C. 272 days
D. 203 days
E. None of these
27. A $40,000 loan at 4% dated June 10 is due to be paid on October 11. The amount of interest is (assume
ordinary interest):
A. $503.00
B. $2,500.00
C. $546.67
D. $105.33
E. None of these
28. Interest on $5,255 at 12% for 30 days (use ordinary interest) is:
A. $52.55
B. $55.25
C. $5.26
D. $5.25
E. None of these
29. Given interest of $11,900 at 6% for 50 days (ordinary interest), one can calculate the principal as:
A. $1,428,005.70
B. $4,128,005.70
C. $1,428,000.00
D. $1,420.70
E. None of these
30. Interest of $1,632 with principal of $16,000 for 306 days (ordinary interest) results in a rate of:
A. 10%
B. 12%
C. 12 1/2%
D. 13%
E. None of these
31. Which of the following is not true of the U.S. Rule?
A. Calculate interest on principal from date of loan to date of first payment
B. Allows borrower to receive proper interest credits
C. Can use 360 days in its calculations
D. Can involve more than one payment before maturity date
E. None of these
32. The U.S. Rule:
A. Is used only by banks
B. Is never used by banks
C. Allows borrowers to receive interest credit
D. Is hardly used today
E. None of these
33. At maturity, using the U.S. Rule, the interest calculated from the last partial payment is:
A. Subtracted from adjusted balance
B. Added to beginning balance
C. Subtracted from beginning balance
D. Added to adjusted balance
E. None of these
34. The number of days between Aug. 9 and Jan. 3 is:
A. 145
B. 144
C. 147
D. 148
E. None of these
35. Jill Ley took out a loan for $60,000 to pay for her child's education. The loan would be repaid at the end
of eight years in one payment with interest of 6%. The total amount Jill has to pay back at the end of the
loan is:
A. $88,008
B. $80,800
C. $88,800
D. $28,800
E. None of these
36. A note dated Dec. 13 and due July 5 runs for exactly:
A. 11 days
B. 161 days
C. 204 days
D. 347 days
E. None of these
37. Janet Home went to Citizen Bank. She borrowed $7,000 at a rate of 8%. The date of the loan was
September 20. Janet hoped to repay the loan on January 20. Assuming the loan is based on ordinary
interest, Janet will pay back how much interest on January 20?
A. $188.22
B. $187.18
C. $189.78
D. $187.17
E. None of these
38. Joan Roe borrowed $85,000 at a rate of 11 3/4%. The date of the loan was July 8. Joan is to repay the
loan on Sept. 14. Assuming the loan is based on exact interest, the interest Joan will pay on Sept. 14
is:
A. $86,860.68
B. $1,860.68
C. $1,886.53
D. $86,886.53
E. None of these
39. Joe Flynn visits his local bank to see how long it will take for $1,200 to amount to $2,100 at a simple
interest rate of 7%. The time is (round time in years to nearest tenth):
A. 9.2 years
B. 11.1 years
C. 10.7 years
D. 17.1 years
E. None of these
40. Matty Kaminsky owns a new Volvo. His June monthly interest is $400. The rate is 8 ½%. Matty's
principal balance at the beginning of June is (use 360 days):
A. $65,740.58
B. $64,470.58
C. $65,704.58
D. $56,470.58
E. None of these
41. Joyce took out a loan for $21,900 at 12% on March 18, 2013, which will be due on January 9, 2014.
Using ordinary interest, Joyce will pay back on Jan. 9 a total amount of:
A. $2,167.10
B. $24,068.10
C. $24,038.40
D. $2,138.40
E. None of these
42. Janet took out a loan of $50,000 from Bank of America at 8% on March 19, 2012, which is due on July 8,
2012. Using exact interest, the amount of Janet's interest cost is:
A. $5,018.44
B. $2,561.44
C. $5,261.44
D. $5,216.44
E. None of these
43. Jim Murphy borrowed $30,000 on a 120-day 14% note. Jim paid $5,000 toward the note on day 95. On
day 105 he paid an additional $6,000. Using the U.S. Rule, Jim's adjusted balance after the first payment
is:
A. $25,000
B. $28,891.67
C. $1,108.33
D. $26,108.33
E. None of these
44. Christina Hercher borrowed $50,000 on a 90-day 8% note. Christina paid $3,000 toward the note on day
40. On day 60 she paid an additional $4,000. Using the U.S. Rule, Christina's adjusted balance after the
first payment is:
A. $1,008.89
B. $48,008.89
C. $47,444.44
D. $44,744.44
E. None of these
45. Sandra Gloy borrowed $5,000 on a 120-day 5% note. Sandra paid $500 toward the note on day 40. On
day 90 she paid an additional $500. Using the U.S. Rule, her adjusted balance after the first payment
is:
A. $4,527.87
B. $4,725.87
C. $4,725.70
D. $4,527.78
E. None of these
46. Banks and other financial institutions sometimes calculate simple interest based on:
A. Exact interest method
B. Using 30 days for each month
C. Using 366 days in the year
D. Bankers rule, ordinary interest
E. None of these
47. With interest of $1,832.00 and a principal of $16,000 for 206 days, using the ordinary interest method,
the rate is:
A. 20%
B. 12%
C. 2%
D. 10%
E. None of these
48. The number of days between May 20 and November 22 is:
A. 197
B. 206
C. 186
D. 183
E. None of these
49. Sue Gastineau borrowed $17,000 from Regions Bank at a rate of 5.5% to open her lingerie shop. The date
of the loan was March 5. Sue hoped to repay the loan on September 19. Assuming the loan is based on
ordinary interest, Sue will pay back how much in interest expense?
A. $467.50
B. $541.25
C. $514.25
D. $506.46
E. None of these
50. On May 17, Jane took out a loan for $33,000 at 6% to open her law practice office. The loan will mature
the following year on January 16. Using the ordinary interest method, what is the maturity value due on
January 16?
A. $34,342
B. $34,320
C. $34,323.62
D. $34,254
E. None of these
51. Match the following terms with their definitions.
1. Exact interest Result of applying the U.S. rule ____
2. Banker's rule Consumer groups against it ____
3. U.S. Rule 365 days ____
4. Adjusted balance 360 days ____
5. Simple interest Cost of borrowing ____

formula
6. Maturity value Amount due on due date ____
7. Interest Maturity value ____
8. Principal and interest Amount of money borrowed ____
9. Principal Principal times rate times time ____
10. Ordinary interest Partial payment must be applied to interest ____

first
52. Round to nearest cent:
A. _____________
B. _____________
A. _____________
B. _____________
54. Use ordinary interest:
A. ____________
B. ____________
C. ____________
55. Use exact interest. Round to nearest cent:
A. ____________
B. ____________
C. ____________
56.
Find the adjusted balance (principal) using the U.S. Rule (360 day) after the first payment.
57. Round to nearest cent or hundredth percent as needed:

58. Round to the nearest cent or hundredth percent as needed.
59. On May 19, Bette Santoro borrowed $3,000 from Resse Bank at a rate of 12½%. The loan is to be repaid
on October 8. Assuming the loan is based on exact interest, what is the total interest cost to Bette?
60. Ron Tagney owns his own truck. His June interest is $210. The current rate of interest is 11%. Assuming
a 360-day year, what was Ron's principal balance at the beginning of June? (Round to nearest cent.)
61. Jones of Boston borrowed $40,000, on a 90-day 10% note. After 60 days, Jones made an initial payment
of $6,000. On day 80, Jones made an additional payment of $7,000. Assuming the U.S. Rule, what is the
adjusted balance of the first payment? Use 360 days.
62. Round all answers to the nearest cent. Woody's Café's real estate tax of $1,110.85 was due on November
1, 2014. Due to financial problems, Woody was unable to pay his café's real estate tax bill until January
15, 2015. The penalty for late payment is 8 1/4% ordinary interest. (A) What is the penalty Woody will
have to pay and (B) what will Woody pay on January 15?
63. Round all answers to the nearest cent. Angel Hall borrowed $82,000 for her granddaughter's college
education. She must repay the loan at the end of nine years with 9¼% interest. What is the maturity value
Angel must repay?
64. Round all answers to the nearest cent. Amy Koy met Pat Quin on Sept. 8 at Queen Bank. After talking
with Pat, Amy decided she would like to consider a $9,000 loan at 10 1/2% to be repaid on Feb. 17
of the next year on exact interest. Calculate the amount that Amy would pay at maturity under this
assumption.
65. Round all answers to the nearest cent. Lou Valdez is buying a truck. His monthly interest is $155 at 10 1/
4 %. What is Lou's principal balance after the beginning of November? Use 360 days. DO NOT round the
denominator in your calculation.
66.
67.
68.
69.

72. Use exact interest:
73. Use exact interest:
74. Given: a 12% 90-day $4,000 note. Find the adjusted balance (principal) using the U.S. rule (360 days)
after the first $800 payment on the 40th day.
75. Given: a 11% 120-day $9,000 note. Find the adjusted balance (principal) using the U.S. Rule (360 days)
after the first payment on the 65th day of $1,000.
76. Solve:
77. Solve:
78. Solve:
79. Solve:
80. Jane Smith took out a loan for $40,000 to pay for her child's education. The loan would be repaid at the
end of eight years in one payment with interest of 12%. What is the total amount Jane has to pay back at
the end of the loan?
81. Abby borrowed $3,000 at 12 3/4% on Sept. 10. The loan is due on Jan. 29. Assuming the loan is based on
ordinary interest, how much will Abby pay on Jan. 29?
82. Bill Roe visits his local bank to see how long it will take for $1,000 to amount to $1,900 at a simple
interest rate of 12 1/2%. Can you provide Bill with the solution to his problem in years?
83. Molly Joy owns her own car. Her June monthly interest was $205. The rate is 13 1/2%. Find out
what Joy's principal balance is at the beginning of June. Use 360 days. (Do not round denominator in
calculation.)
84. Alice took out a loan for $19,500 at 13 1/2% on March 4, 2013, which will be due on
January 14, 2014. Using ordinary interest, what will be the interest cost and what amount will Alice pay
back on January 14, 2014?
85. Bruce Seem took out the same loan as Alice, but his terms were exact interest. What is the difference in
interest, and what will Bruce pay back on January 14, 2014?
86. Ben Young borrowed $5,000 on April 19 from Reliance Bank at a rate of 6.75%. Ben must repay the loan
on December 16 of the same year. Assuming the loan is based on exact interest, what is the total interest
cost?
87. Rochelle Destin bought a new Buick Lucerne. Her monthly January interest was $194.00. The current
rate of interest is 9%. Assuming a 360-day year, what was Rochelle's balance at the beginning of
January?
88. Joe and Kathy Graczak borrowed $132,000 for their son's four-year college education. They must repay
the loan at the end of 10 years. With 4.25% on their parent's PLUS loan, what is the maturity value Joe
and Kathy must repay?
89. Tom borrowed $150,000 for his son Jeff's law school tuition at the University of Mississippi. Tom
received a rate of 3.75% for 5 years. Using 360 days in a year, what is the maturity value of the loan?
90. Calculate the following:

10 Key
1. The interest is the amount of money borrowed.
FALSE
The interest is the cost of money borrowed.
Blooms: Understand
Learning Objective: 10-01 (1) Calculate simple interest and maturity value for months and years
Level of Difficulty: 1 Basic
Slater - Chapter 10 #1
Topic Area: LU 10-01: Calculation of Simple Interest and Maturity Value
2. The time of a loan could be expressed in months, years, or days.
TRUE
The time of a loan could be expressed in months, years, or days.
Blooms: Understand
3. The amount a bank charges for the use of money is called interest.
TRUE
The amount the bank charges for use of money is called interest.
Blooms: Understand
4. Simple interest loans are usually more than one year.
FALSE
Simple interest loans are usually one year or less.
Blooms: Understand
5. Interest = principal × rate.
FALSE
Interest = principal × rate × time.
Blooms: Understand
6. 18 months is the same as 1.5 years.
TRUE
18 months is the same as 1.5 years.
Blooms: Understand
7. The exact interest method represents time as the exact number of days divided by 365.
TRUE
The exact interest method represents time as the exact number of days divided by 365.
Blooms: Understand
Learning Objective: 10-01 (2) Calculate simple interest and maturity value by (a) exact interest and (b) ordinary interest
8. The federal government likes to use ordinary interest.
FALSE
The federal government likes to use exact interest.
Blooms: Understand
9. July 10 to March 15 is 119 days.
FALSE
July 10 to March 15 is 248 days.
Blooms: Apply
Level of Difficulty: 2 Intermediate
10. Ordinary interest is never used by banks.
FALSE
After a court case in Oregon, banks began calculating interest on 365 days except in the case of
mortgages.
Blooms: Understand
11. Ordinary interest results in a slightly higher rate of interest than exact interest.
TRUE
Ordinary interest results in a slightly higher rate of interest than exact interest.
Blooms: Remember
12. The U.S. Rule is seldom used in today's workplace.
FALSE
Courts or legal proceedings generally use the U.S. Rule.
Blooms: Remember
Learning Objective: 10-03 (1) List the steps to complete the U.S. Rule
Topic Area: LU 10-03: U.S. Rule—Making Partial Note Payments before Due Date
13. Principal is equal to rate divided by interest times time.
FALSE
Principal is equal to interest divided by rate times time.
Blooms: Understand
Learning Objective: 10-02 (1) Using the interest formula; calculate the unknown when the other two (principal; rate; or time) are given
Level of Difficulty: 3 Challenge
Topic Area: LU 10-02: Finding Unknown in Simple Interest Formula
14. Rate is equal to interest divided by the principal times time.
TRUE
Rate is equal to interest divided by the principal times time.
Blooms: Remember
15. To convert time in days, it is necessary to multiply the time in years times 360 or 365.
TRUE
To convert time in days, it is necessary to multiply the time in years times 360 or 365.
Blooms: Understand
16. The U.S. Rule is a method that allows the borrower to receive proper interest credit when a debt is
paid off in more than one payment before the maturity date.
TRUE
The U.S. Rule is a method that allows the borrower to receive proper interest credit when a debt is
paid off in more than one payment before the maturity date
Blooms: Understand
17. In the U.S. Rule, the first step is to calculate interest on the total life of the loan.
FALSE
This rule states that any partial loan payment first covers any interest that has built up. The remainder
of the partial payment reduces the loan principal.
Blooms: Understand
18. In the U.S. Rule, the partial payment first covers the interest and the remainder reduces the
principal.
TRUE
In the U.S. Rule, the partial payment first covers the interest and the remainder reduces the principal.
Blooms: Understand
19. Ordinary interest is required by all banks.
FALSE
Ordinary interest is not required by all banks.
Blooms: Understand
20. Interest is the cost of borrowing.
TRUE
Interest is the cost of borrowing.
Blooms: Understand
21. In calculating interest in the U.S. Rule from the last partial payment, the interest is subtracted from the
adjusted balance.
FALSE
In calculating interest in the U.S. Rule from the last partial payment, the interest is added from the
adjusted balance.
Blooms: Understand
22. Interest is equal to:
A. Principal × rate divided by time
B. Principal divided by rate × time
C. Principal × time
D. Principal × rate × time
E. None of these
Blooms: Understand
23. The amount charged for the use of a bank's money is called:
A. Principal
B. Interest
C. Rate
D. Time
E. None of these
Blooms: Understand
24. Simple interest usually represents a loan of:
A. One month or less
B. One year or less
C. Two years or less
D. Six months or less
E. None of these
Simple interest usually represents a loan of one year or less.
Blooms: Understand
25. Federal Reserve banks as well as the federal government like to calculate simple interest based on:
A. Exact interest, ordinary interest
B. Using 30 days in each month
C. Using 31 days in each month
D. Exact interest
E. None of these
Federal Reserve banks as well as the federal government like to calculate simple interest based on
exact interest.
Blooms: Understand
26. A note dated August 18 and due on March 9 runs for exactly:
A. 230 days
B. 227 days
C. 272 days
D. 203 days
E. None of these
365 - 230 + 68 = 203.
Blooms: Apply
27. A $40,000 loan at 4% dated June 10 is due to be paid on October 11. The amount of interest is
(assume ordinary interest):
A. $503.00
B. $2,500.00
C. $546.67
D. $105.33
E. None of these
$40,000 × .04 × 123/360 = $546.67.
Blooms: Apply
28. Interest on $5,255 at 12% for 30 days (use ordinary interest) is:
A. $52.55
B. $55.25
C. $5.26
D. $5.25
E. None of these
$5,255 × .12 × 30/360 = $52.55.
Blooms: Apply
29. Given interest of $11,900 at 6% for 50 days (ordinary interest), one can calculate the principal as:
A. $1,428,005.70
B. $4,128,005.70
C. $1,428,000.00
D. $1,420.70
E. None of these
$11,900/(.06 × (50/360)) = $1,428,000.00
Blooms: Apply
30. Interest of $1,632 with principal of $16,000 for 306 days (ordinary interest) results in a rate of:
A. 10%
B. 12%
C. 12 1/2%
D. 13%
E. None of these
$1,632/($16,000 × (306/360)) = 12%.
Blooms: Apply
31. Which of the following is not true of the U.S. Rule?
A. Calculate interest on principal from date of loan to date of first payment
B. Allows borrower to receive proper interest credits
C. Can use 360 days in its calculations
D. Can involve more than one payment before maturity date
E. None of these
None of these is true of the U.S. Rule.
Blooms: Understand
32. The U.S. Rule:
A. Is used only by banks
B. Is never used by banks
C. Allows borrowers to receive interest credit
D. Is hardly used today
E. None of these
The U.S. Rule allows borrowers to receive interest credit.
Blooms: Understand
33. At maturity, using the U.S. Rule, the interest calculated from the last partial payment is:
A. Subtracted from adjusted balance
B. Added to beginning balance
C. Subtracted from beginning balance
D. Added to adjusted balance
E. None of these
At maturity, using the U.S. Rule, the interest calculated from the last partial payment is added to the
adjusted balance.
Blooms: Understand
34. The number of days between Aug. 9 and Jan. 3 is:
A. 145
B. 144
C. 147
D. 148
E. None of these
365 - 221 + 3 = 147.
Blooms: Apply
35. Jill Ley took out a loan for $60,000 to pay for her child's education. The loan would be repaid at the
end of eight years in one payment with interest of 6%. The total amount Jill has to pay back at the end
of the loan is:
A. $88,008
B. $80,800
C. $88,800
D. $28,800
E. None of these
$60,000 × .06 × 8 = $28,800 + $60,000 = $88,800.
Blooms: Understand
36. A note dated Dec. 13 and due July 5 runs for exactly:
A. 11 days
B. 161 days
C. 204 days
D. 347 days
E. None of these
365 - 347 + 186 = 204.
Blooms: Apply
37. Janet Home went to Citizen Bank. She borrowed $7,000 at a rate of 8%. The date of the loan was
September 20. Janet hoped to repay the loan on January 20. Assuming the loan is based on ordinary
interest, Janet will pay back how much interest on January 20?
A. $188.22
B. $187.18
C. $189.78
D. $187.17
E. None of these
$7,000 × .08 × 122/360 = $189.78.
Blooms: Apply
38. Joan Roe borrowed $85,000 at a rate of 11 3/4%. The date of the loan was July 8. Joan is to repay the
loan on Sept. 14. Assuming the loan is based on exact interest, the interest Joan will pay on Sept. 14
is:
A. $86,860.68
B. $1,860.68
C. $1,886.53
D. $86,886.53
E. None of these
$85,000 × .1175 × 68/365 = $1,860.68.
Blooms: Apply
39. Joe Flynn visits his local bank to see how long it will take for $1,200 to amount to $2,100 at a simple
interest rate of 7%. The time is (round time in years to nearest tenth):
A. 9.2 years
B. 11.1 years
C. 10.7 years
D. 17.1 years
E. None of these
$900/($1,200 × .07) = 10.71 = 10.7 years.
Blooms: Understand
40. Matty Kaminsky owns a new Volvo. His June monthly interest is $400. The rate is 8 ½%. Matty's
principal balance at the beginning of June is (use 360 days):
A. $65,740.58
B. $64,470.58
C. $65,704.58
D. $56,470.58
E. None of these
$400/(.085 × (30/360)) = $56,470.58.
Blooms: Apply
41. Joyce took out a loan for $21,900 at 12% on March 18, 2013, which will be due on January 9, 2014.
Using ordinary interest, Joyce will pay back on Jan. 9 a total amount of:
A. $2,167.10
B. $24,068.10
C. $24,038.40
D. $2,138.40
E. None of these
Calculate the interest. Then, calculate the maturity value.

21,900 x .12 x .825 = 2168.10
21,900 + 2168.10 = 24,068.10
Blooms: Apply
42. Janet took out a loan of $50,000 from Bank of America at 8% on March 19, 2012, which is due on
July 8, 2012. Using exact interest, the amount of Janet's interest cost is:
A. $5,018.44
B. $2,561.44
C. $5,261.44
D. $5,216.44
E. None of these
$50,000 × .08 × 111/365= $1216.44.
Blooms: Understand
43. Jim Murphy borrowed $30,000 on a 120-day 14% note. Jim paid $5,000 toward the note on day 95.
On day 105 he paid an additional $6,000. Using the U.S. Rule, Jim's adjusted balance after the first
payment is:
A. $25,000
B. $28,891.67
C. $1,108.33
D. $26,108.33
E. None of these
$30,000.00 - 3,891.67 = $26,108.33.
Blooms: Apply
44. Christina Hercher borrowed $50,000 on a 90-day 8% note. Christina paid $3,000 toward the note on
day 40. On day 60 she paid an additional $4,000. Using the U.S. Rule, Christina's adjusted balance
after the first payment is:
A. $1,008.89
B. $48,008.89
C. $47,444.44
D. $44,744.44
E. None of these
$50,000.00 - 2,555.56 = $47,444.44.
Blooms: Apply
45. Sandra Gloy borrowed $5,000 on a 120-day 5% note. Sandra paid $500 toward the note on day 40. On
day 90 she paid an additional $500. Using the U.S. Rule, her adjusted balance after the first payment
is:
A. $4,527.87
B. $4,725.87
C. $4,725.70
D. $4,527.78
E. None of these
$5,000 - $472.22 = $4,527.78.
Blooms: Apply
46. Banks and other financial institutions sometimes calculate simple interest based on:
A. Exact interest method
B. Using 30 days for each month
C. Using 366 days in the year
D. Bankers rule, ordinary interest
E. None of these
Blooms: Understand
47. With interest of $1,832.00 and a principal of $16,000 for 206 days, using the ordinary interest method,
the rate is:
A. 20%
B. 12%
C. 2%
D. 10%
E. None of these
1832/(16,000 x 206/360) = 20%
Blooms: Apply
Topic Area: Finding Unknown in Simple Interest Formula
48. The number of days between May 20 and November 22 is:
A. 197
B. 206
C. 186
D. 183
E. None of these
Blooms: Understand
Topic Area: Calculation of Simple Interest and Maturity Value
49. Sue Gastineau borrowed $17,000 from Regions Bank at a rate of 5.5% to open her lingerie shop. The
date of the loan was March 5. Sue hoped to repay the loan on September 19. Assuming the loan is
based on ordinary interest, Sue will pay back how much in interest expense?
A. $467.50
B. $541.25
C. $514.25
D. $506.46
E. None of these
17,000 x .055 x 198/360= 514.25
Blooms: Apply
50. On May 17, Jane took out a loan for $33,000 at 6% to open her law practice office. The loan will
mature the following year on January 16. Using the ordinary interest method, what is the maturity
value due on January 16?
A. $34,342
B. $34,320
C. $34,323.62
D. $34,254
E. None of these
Calculate the interest and then, calculate the maturity value (MV = P + I).
33,000 x .06 x 244/360 = 1342
33,000 x 1342 = 34,342
Blooms: Apply
51. Match the following terms with their definitions.
1. Exact interest Result of applying the U.S. rule 4
2. Banker's rule Consumer groups against it 2
3. U.S. Rule 365 days 1
4. Adjusted balance 360 days 10
5. Simple interest Cost of borrowing 7

formula
6. Maturity value Amount due on due date 6
7. Interest Maturity value 8
8. Principal and interest Amount of money borrowed 9
9. Principal Principal times rate times time 5
10. Ordinary interest Partial payment must be applied to interest 3
first
Blooms: Evaluate
A. _____________
B. _____________
A. $6,720
B. $38,720
Feedback: A. $6,720 = ($32,000 × .07 × 3); B. $38,720 = ($32,000 + $6,720).
Blooms: Understand
A. _____________
B. _____________
A. $540
B. $18,540
Feedback: A. $540 = $18,000 × .09 × 4/12; B. $18,540 ($540 + $18,000).
Blooms: Understand
A. ____________
B. ____________
C. ____________
A. 110 days
B. $302.50
C. $9,302.50
Feedback: A. 110 days; B. $302.50 = $9,000 × .11 × 110/360; C. $9,302.50 = ($9,000 + $302.50).
Blooms: Apply
55. Use exact interest. Round to nearest cent:
A. ____________
B. ____________
C. ____________
A. 127 days; B. $626.30; C. $15,626.30
Feedback: A. 127 days; B. $626.30; C. $15,626.30.

15,000 x .12 x 127/365
Blooms: Apply
56.
Find the adjusted balance (principal) using the U.S. Rule (360 day) after the first payment.
$6,164.17
7000 x .11 x 30/360 = 64.17
900 - 64.17= 835.83
Feedback: $7,000 - $835.83 = $6,164.17.
Blooms: Apply
57. Round to nearest cent or hundredth percent as needed:
$68,181.82
Feedback: $68, 181.94 = $1,250/(.11 × (2/12)). Denominator was not rounded.
Blooms: Apply
58. Round to the nearest cent or hundredth percent as needed.
13. 89%
Feedback: 13.89% = $405/(5,000 × (7/12)).
Blooms: Apply
59. On May 19, Bette Santoro borrowed $3,000 from Resse Bank at a rate of 12½%. The loan is to be
repaid on October 8. Assuming the loan is based on exact interest, what is the total interest cost to
Bette?
$145.89
Feedback: $145.89 = $3,000 × .125 × 142/365.
Blooms: Apply
60. Ron Tagney owns his own truck. His June interest is $210. The current rate of interest is 11%.
Assuming a 360-day year, what was Ron's principal balance at the beginning of June? (Round to
nearest cent.)
$22,909.09
Feedback: $22,909.26 = $210/(.11 × (30/360)). Denominator was not rounded.
Blooms: Apply
61. Jones of Boston borrowed $40,000, on a 90-day 10% note. After 60 days, Jones made an initial
payment of $6,000. On day 80, Jones made an additional payment of $7,000. Assuming the U.S. Rule,
what is the adjusted balance of the first payment? Use 360 days.
$34,666.67
40,000 x .10 x 60/360 = 666.67
6000 - 666.67 = 5333.33
Feedback: $40,000 - $5,333.33 = $34,666.67.
Blooms: Apply

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Practical Business Math Procedures 11th Edition Slater Test Bank

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Practical Business Math Procedures

11th edition Slater Test Bank

1. The interest is the amount of money borrowed.

2. Banker's rule Consumer groups against it ____

3. U.S. Rule 365 days ____

4. Adjusted balance 360 days ____

5. Simple interest Cost of borrowing ____

7. Interest Maturity value ____

8. Principal and interest Amount of money borrowed ____

9. Principal Principal times rate times time ____

10. Ordinary interest Partial payment must be applied to interest ____

53. Round to nearest cent:

55. Use exact interest. Round to nearest cent:

57. Round to nearest cent or hundredth percent as needed:

70. Use ordinary interest:

71. Use ordinary interest:

73. Use exact interest:

90. Calculate the following:

The interest is the cost of money borrowed.

The time of a loan could be expressed in months, years, or days.

Simple interest loans are usually one year or less.

Interest = principal × rate × time.

18 months is the same as 1.5 years.

The federal government likes to use exact interest.

July 10 to March 15 is 248 days.

Courts or legal proceedings generally use the U.S. Rule.

Principal is equal to interest divided by rate times time.

Rate is equal to interest divided by the principal times time.

Ordinary interest is not required by all banks.

Interest is the cost of borrowing.

Simple interest usually represents a loan of one year or less.

365 - 230 + 68 = 203.

$40,000 × .04 × 123/360 = $546.67.

$5,255 × .12 × 30/360 = $52.55.

$11,900/(.06 × (50/360)) = $1,428,000.00

$1,632/($16,000 × (306/360)) = 12%.

None of these is true of the U.S. Rule.

The U.S. Rule allows borrowers to receive interest credit.

365 - 221 + 3 = 147.

$60,000 × .06 × 8 = $28,800 + $60,000 = $88,800.

365 - 347 + 186 = 204.

$7,000 × .08 × 122/360 = $189.78.

$85,000 × .1175 × 68/365 = $1,860.68.

$900/($1,200 × .07) = 10.71 = 10.7 years.

$400/(.085 × (30/360)) = $56,470.58.

Calculate the interest. Then, calculate the maturity value.

$50,000 × .08 × 111/365= $1216.44.

$30,000.00 - 3,891.67 = $26,108.33.

$50,000.00 - 2,555.56 = $47,444.44.

$5,000 - $472.22 = $4,527.78.

1832/(16,000 x 206/360) = 20%

17,000 x .055 x 198/360= 514.25

5. Simple interest Cost of borrowing 7

Feedback: A. $6,720 = ($32,000 × .07 × 3); B. $38,720 = ($32,000 + $6,720).

Feedback: A. $540 = $18,000 × .09 × 4/12; B. $18,540 ($540 + $18,000).

A. 127 days; B. $626.30; C. $15,626.30

Feedback: A. 127 days; B. $626.30; C. $15,626.30.

Feedback: $7,000 - $835.83 = $6,164.17.

Feedback: $68, 181.94 = $1,250/(.11 × (2/12)). Denominator was not rounded.

Feedback: 13.89% = $405/(5,000 × (7/12)).

Feedback: $145.89 = $3,000 × .125 × 142/365.

Feedback: $22,909.26 = $210/(.11 × (30/360)). Denominator was not rounded.

Feedback: $40,000 - $5,333.33 = $34,666.67.