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Comparing Simple And Compound Interest
Test Description: Practice comparing simple and compound interest
Instructions: Answer all questions to get your test result.
1) A customer will borrow $12,000 to buy a car. Which loan option would allow the customer to pay the least amount of interest?
A
3-year loan with a 8.4% annual simple interest rate
B
5-year loan with a 4.2% annual simple interest rate
C
6-year loan with a 4.7% annual simple interest rate
D
4-year loan with a 5.2% annual simple interest rate
2) Henry took out a 4-year loan for $5,000 and paid 4.2% annual simple interest. Ingrid took out a 6-year loan for $5,000 and paid 3.9% annual simple interest. What is the difference between the amounts of interest Henry and Ingrid paid for their loans?
A
$417
B
$150
C
$60
D
$330
3) A students' parents invested $5,000 in a college savings account that pays 4.85% annual simple interest. Which amount is closest to the interest earned on the account at the end of 15 years?
A
$3637.50
B
$10,174.11
C
$5,174.11
D
$8637.50
4) An employee put $5,000 in a retirement account that offers 9% interest compounded annually. Which amount is closest to the interest the employee will have earned at the end of 5 years?
A
$229.09
B
$2693.12
C
$2,250.00
D
$450.00
5) Mr. Flores opened an account with a deposit of $5,000. The account earned annual simple interest and at the end of 4 years, the balance of the account was $6,500. What is the annual interest rate on this account?
A
3.3%
B
7.5%
C
5.8%
D
1.9%
6) Mr. Wilkins deposited $2,500 in a new account at his bank. The bank pays 6.5% interest compounded annually on this account. Which amount is closest to the balance of the account at the end of 2 years?
A
$2,835.56
B
$2,825.00
C
$2,513.00
D
$2,662.50
7) May deposits $2,500 into each of two savings accounts. Account I earns 4% annual simple interest and Account II earns 4% interest compounded annually. What is the sum of balances of Account I and Account II at the end of 3 years?
A
$5,600.00
B
$5,200.00
C
$5,624.32
D
$5,612.16
8) Paul deposits $1,750 into each of two savings accounts. Account I earns 2.75% annual simple interest and Account II earns 2.75% interest compounded annually. Which amount is closest to the difference between the interest Paul will earn in 2 years?
A
$1.32
B
$96.25
C
$193.82
D
$97.57
9) Holly is taking out a loan in the amount of $10,000. Her choices for the loan are a 4-year loan at 4% simple interest and a 6-year loan at 5% simple interest. What is the difference in the amount of interest Holly will have to pay for each loan?
A
$3,000
B
$1,400
C
$4,600
D
$1,600
10) Clarissa need a $2,500 loan in order to buy a car. Which loan option would allow her to pay the least amount of interest?
A
A 30-MONTH loan with a 4.00% annual simple interest rate
B
An 18-MONTH loan with a 4.75% annual simple interest rate
C
A 36-MONTH loan with a 4.50% annual simple interest rate
D
A 24-MONTH loan with a 4.25% annual simple interest rate
*select an answer for all questions
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