Financial Management Exam Questions And Answers Verified 100% Correct

Financial Management Exam Questions And Answers Verified 100% Correct Yvette is considering taking out a loan with a principal of $16,200 from one of 2 banks. Bank f charges an interest rate of 5.7%, compounded monthly, and requires that the loan be paid off in 8 years. Bank g charges an interest rate of 6.2%, compounded monthly, and requires that the loan be paid off in 7 years. How would you recommend that Yvette choose her loan? - ANSWER -B. Yvette should choose bank Fs loan if she cares more about monthly payments, and she should choose bank Gs loan if she cares more about the lowest cost. Colin took out a principal of $32,800. After 5 years, the interest and principal totaled $48,872. If Colin made monthly payments if $816 for 5 years until the loan was paid off, how much did colon pay I'm service charges? - ANSWER -B. $88 Dana just finished paying off the $15,400 loan she took out 4 years ago. The loan had 6.68% interest, compounded monthly. If Dana paid a total of $18,321.60, how much did she pay in service charges? - ANSWER -A. $730.08 What is the difference between a service charge and a finance charge? - ANSWER -D. A service charge is a fee assessed by a lender other than interest, and a finance charge is the total of the interest paid on a loan and the service charge. How does truth-in-lending benefit consumers when shopping for a loan? - ANSWER -D. Truth-in-lending allows consumers to know every cost that is associated with the loans they research and apply for, and helps them reach the optimal decision. Tamora just made the last of her monthly payment on her loan. She had been making these payment for the last 9 years. The loan had a principal of $10,675 and an interest rate of 4.75%, compounded monthly. In addition, tamora paid $939.25 in service charges. What was tamoras total finance charge? - ANSWER -C. $3.403.53 Suppose that you took out a loan with a principal of $24,680. To pay off the principal and the interest, you made quarterly payments of $1,382 for 6 years. Furthermore, you paid a service charge of $396. What was your total finance charge? - ANSWER -C. $8,884 You are considering taking out 1 of 2 loans. Loan r has a principal of $17,550, and an interest rate of 5.32% and a duration of 7 years. Loan s has a principal of $15,925, an interest rate of 6.07% and a duration of 9 years, assuming that you pay back each in monthly intervals, which loan will have a greater lifetime total, and how much greater will it be? - ANSWER -C. Loan rs lifetime total will be $350.88 greater than loan Ss Jocelyn is considering taking out 1 of the 2 following loans. Loan h is a 3 year loan with a principal of $5,650 and an interest rate of 12.24%, compounded monthly. Loan I is a 4 year loan with a principal of $6 - ANSWER - Why do interest rates on loans tend to be lower in a weak economy than in a strong one? - ANSWER -C. In a weak economy there is less demand for credit, so the price drops. Jessica's bank is offering her a loan with a stated rate of 4.90% interest. If the interest is compounded every two months, what will Jessica really pay for intrest? - ANSWER - B. 5.00% Thomas has a loan with a nominal interest rate of 6.4624% and an effective interest rate of 6.4715%. Which of the following must be true? - ANSWER -B. II only When calculating a loans effective interest rate, if the nominal rate is 8.5%, what value of I do you plug in to your equation? - ANSWER -C. 0.085 Say you are considering 2 loans. Loan F has a nominal interest rate of 5.66%, compounded monthly. Loan G has a rate of 6.02%, compounded semiannually. Which Loan will give the lower effective interest rate, and how much lower will it be? - ANSWER -C. Loan Fs effective rate will be 0.302 percentage points lower than loan Gs