a. Graduated payments result in the borrower paying
A. more at the beginning of the mortgage.
B. less at the beginning of the mortgage.
C. the mortgage at 1¨M2 the standard rate.
D. less at the end of the mortgage.
Answer: B
2. When are annuity due payments made?
A. At the beginning of the period
B. Monthly
C. Yearly
D. At the end of the period
Answer: A
3. Using the tables in the Business Math Handbook that accompanies the course textbook, determine the
difference between the monthly payments on a $120,000 home at 61¨M2% and at 8% for 25 years.
A. $81.12
B. $91.12
C. $151.02
D. $115.20
Answer: C
4. An annuity due can use the ordinary annuity table if one extra period is added and
A. three payments are subtracted from total value.
B. one payment is subtracted from total value.
C. one payment is added to total value.
D. two payments are added to total value.
Answer: B
5. Joe Sullivan invests $9,000 at the end of each year for 20 years. The rate of interest Joe gets is 8%
annually. Using the tables in the Business Math Handbook that accompanies the course textbook,
determine the final value of Joe's investment at the end of the 20th year on this ordinary annuity.
A. $88,632.90
B. $88,362.90
C. $411,858.00
D. $411,588.00
Answer: B
6. Connie made deposits of $2000 at the beginning of each year for four years. The rate she earned is 5%
annually. What is the value of Connie's account in four years?
A. $9,051.20
B. $8,260.20
C. $8,260.00
D. $11,051.00
Answer: C
7. Which one of the following methods is not based on the passage of time?
A. None of these
B. Straight-line method
C. Units-of-production method
D. Declining-balance method
Answer: B
8. Federal Express bought material handling equipment for its hub operations that cost $180,000. Using the
MACRS, what is the depreciation expense in year 3 (using a five-year class)?
A. $43,560
B. $34,560
C. $15,360
D. $40,000
Answer: D
9. Use the following information to answer the question:
Cost of car: $26,000
Residual value: $6,000
Life: 5 years
Answer: ???
Using the given information, determine the depreciation expense for the first year straight-line method?
A. $6,000
B. $4,400
C. $4,000
D. $5,200
Answer: A
10. Megan Mei is charged 2 points on a $120,000 loan at the time of closing. The original price of the
home before the down payment was $140,000. How much do the points in dollars cost Megan?
A. $2,400
B. $4,200
C. $8,200
D. $2,800
Answer: c
11. Jay Corporation has earned $175,900 after tax. The accountant calculated the return on equity as
12.5%. Jay Corporation's stockholders' equity to the nearest dollar is
A. $14,720.
B. $140,720,000.
C. $140,720.
D. $1,407,200.
Answer: A
12. A truck costs $35,000 with a residual value of $2,000. Its service life is five years. Using the decliningbalance
method at twice the straight-line rate, the book value at the end of year 2 is
A. $12,600.
B. $35,000.
C. $33,000.
D. $22,000.
Answer: B
13. Jen purchased a condo in Naples, Florida, for $699,000. She put 20% down and financed the rest at
5% for 35 years. What are Jen's total finance charges?
A. $600,000.00
B. $606,823.20
C. $626,863.20
D. $457,425.60
Answer: B
14. In calculating the daily balance, cash advances are
A. sometimes added in.
B. always added in.
C. sometimes subtracted out.
D. always subtracted out.
Answer: B
15. A new piece of equipment costs $18,000 with a residual value of $600 and an estimated useful life of
five years. Assuming twice the straight-line rate, the book value at the end of year 2 using the declining balance
method is
A. $18,000.
B. $7,200.
C. $6,480.
D. $11,520.
Answer: c
16. The acid test ratio does not include
A. supplies.
B. cash.
C. inventory.
D. accounts receivable.
Answer: D
17. Depreciation expense in the declining-balance method is calculated by the depreciation rate
A. times accumulated depreciation at year end.
B. times book value at beginning of year.
C. divided by book value at beginning of year.
D. plus book value at end of year.
Answer: A
18. In an ordinary annuity, when does the interest on a yearly investment start building interest?
A. At the end of the first period
B. After the second period ends
C. At the beginning of the first period
D. During the first period
Answer: B
19. Open credit in a revolving charge plan results in
A. the U.S. Rule being applied to each purchase.
B. one purchase per month.
C. as many charged purchases till credit limit is reached.
D. as many cash purchases till credit limit is reached.
Answer: D
20. What is a sinking fund?
A. It aids in meeting a future obligation.
B. It requires one lump sum payment at the beginning.
C. It's not really an annuity.
D. It doesn't compound its money.
Answer: C
21. If a car is depreciated in four years, what is the rate of depreciation using twice the straight-line rate?
A. 75%
B. 25%
C. 50%
D. 100%
Answer: B
22. Hercher bought a home in Homewood, Illinois, for $230,000. He put down 20% and obtained a
End of exam
mortgage for 25 years at 8%. What is the total interest cost of the loan?
A. $184,000.00
B. $242,411.00
C. $327,372.80
D. $242,144.00
Answer: B
23. A $104,000 selling price with $24,000 down at 81¨M2% for 25 years results in a monthly payment of
A. $654.60.
B. $546.06.
C. $645.60.
D. $644.80.
Answer: C
24. What does an amortization schedule show?
A. The balance of interest outstanding
B. The increase to principal
C. The portion of payment broken down to interest and principal
D. The increase in loan outstanding
Answer: A
25. At the beginning of each year for 14 years, Sherry Kardell invested $400 that earns 10% annually.
What is the future value of Sherry's account in 14 years?
A. $14,000
B. $13,100
C. $12,309
D. $12,709
Answer: B
3 answers
compounded annually. Using the tables in the Business Math Handbook that accompanies the course
textbook, calculate the value of Ted's annuity at the end of eight years.
1 answer