QUESTION 1

1. Marina had an accident with her car and the repair bill came to $900. She didn't have any emergency fund money and no extra money in her monthly budget, so she ended up borrowing from a pay-day loan company. As long as she can pay the loan back at the end of the 30 day period she won't be charged any interest, technically. However, she did have to pay an $19 processing fee per $100 that she borrowed.

If she were to consider the processing fee to represent interest paid in her formula, what would she discover to be the annual interest rate she was charged on her short term loan?

QUESTION 2

1. The end of the month has arrived and Marina was only able to save up $150 to pay off her pay-day loan so far. This means she will have to delay payment on the remaining $750. Besides the delayed payment fee that she is charged, she will now have to pay interest on the remaining amount. The APR (annual percentage rate) is 47%, but the interest is compounded daily.

What is the effective interest rate that Marina will actually be paying?

QUESTION 3

1. It took her 9 more months but Marina has managed to save the full $750 plus more to cover fees to pay off the pay-day loan company. However, she forgot to account for the interest that had been compounding over time on the loan amount. Consider it is now 275 days later, the remaining loan was $750 and the APR is 47% compounded daily.

What is the total amount that Marina must now pay in order to pay off her the loan, accounting for interest?

What is the total amount of interest paid (not including fees)?

QUESTION 4

1. Anna wants to travel after graduation but she isn't working while in school so she won't be able to put money aside regularly. However, her grandmother gave her the generous gift of $2500 for her birthday and suggested she invest it in a GIC because it's low risk. She shopped around and found a 4 year GIC investment that earns 2.4% Interest annually.

How much will Anna have at the end of her four year investment?

How much interest will be earned?

QUESTION 5

1. Anna was pretty disappointed with how little money she would have and so she started looking at other investment options that might involve higher risk but would also offer more possible return. Her bank's financial advisor suggested a mutual fund that she said was only moderately risky but had a record of 9.5% annual return.

Assuming the mutual fund preformed as well as it has in the past, how much would Anna's investment of $2500 potentially be after 4 years if she decided to go with this option?

How much interest will be earned?

QUESTION 6

1. Victor would like to buy his first car and the one he has his eye on is $25,000, plus an extra 13% HST for a total price of $28,250. The dealership has a deal for $0 down payment and charges 2.89% interest on the loan. Victor plans to make car loan payments weekly and has accepted the maximum loan repayment period of 8 years.

How much will his weekly care loan payment be?

How much will he have paid to the dealership by the time his loan is paid off?

How much interest will be paid?

QUESTION 7

1. Hak Young is tired at the end of the semester and decides he really needs a break so he pays for a one week all-inclusive trip to Disney Land with his credit card. In total the trip cost $3000 and his credit card charges 21% interest compounded monthly. He doesn't expect that he will have the money to pay off his credit card until he graduates and is working full time which will be at least another 18 months.

How much will Hak Young's trip have truly cost him by the time he can start to pay it off?

What will be the total interest paid?

QUESTION 8

1. Hak Young has gone on to accumulate other credit card debt on top of what he owes from his Disney Land vacation and his total debit is now $13,864.82. He is getting worried about his debt and is determined to pay it off completely.

With all conditions of the account being the same as before, what would Hak Young's minimum payment have to be in order to pay off his debt in 5 years?

What will be the total interest paid?

QUESTION 9

1. Hak Young is daunted by that monthly payment amount and is trying to figure out how he can make paying off his loan more manageable. He went to his bank and found out he could get a personal loan that he could then use to pay off his credit card. The personal loan has an interest rate of 9% compounded monthly.

Assuming he still planned to pay off his debt in 5 years, what would his monthly payments to the bank be now?

What will be the total interest paid?

QUESTION 10

1. By the time Harsh graduated school he had an OSAP loan of $22,000. The interest charged on the loan is about 4.5% which is compounded monthly. Harsh has decided he had better focus on getting the loan paid off as quickly as possible to save paying a lot of extra money in interest. He set for himself the goal of paying off the loan in three years.

What would Harsh's monthly loan payments have to be in order to achieve his goal?

What will be the total interest paid?

QUESTION 11

1. Harsh realizes that payment amount is not manageable based on how much he currently makes and all of the other expenses he also has to budget for. As a result he decides paying off his loan in 6 years is simply more realistic.

What would Harsh's monthly loan payments be with this new time line?

What will be the total interest paid?

QUESTION 12

1. Belle, who has just started her first full-time salary job is determined to have $1 million in her account by the time she retires. She is now 25 and hopes to retire at 65 years of age. Her investments have been earning 6.25% annual return and she thinks it's realistic that can be maintained.

How much would Belle have to put aside each month, in order to reach her goal?

What is the total amount of money she will have saved?

How much interest will have been earned?

QUESTION 13

1. While she was travelling, Zainab took advantage of the convenience of cash withdrawals on her credit card since her Canadian debit card wasn't accepted in the country she was in. According to her travel budget she withdrew $150 every day for food, activities and shopping for 21 days. When she got home, on the 21st day, she checked her credit card bill on-line and it showed that she had been charged interest already even though her payment wasn't past due. It turns out that interest is compounded daily on cash withdrawals, from the day the cash is withdrawn.

If the interest rate on cash withdrawals is 28%, what was her total bill when she got home?

What would be the total interest paid?

QUESTION 14

1. Aya and Harumi would like to buy a house and their dream house costs $500,000. They have $50,000 saved up for a down payment but would still need to take out a mortgage loan for the remaining $450,000 and they're not sure whether they could afford the monthly loan payments. The bank has offered them an interest rate of 3.75%, compounded monthly.

How much would they have to be able to afford to pay each month in order to pay off their mortgage in 25 years?

What is the total amount that would be paid to the lender after 25 years of payments?

QUESTION 15

1. What if Aya and Harumi could only afford a monthly payment of $2,000?

What would be the maximum mortgage amount they could afford to borrow from the bank, if all the other conditions were the same?

What is the total amount that would be paid to the lender over 25 years?

QUESTION 16

1. Mark is looking to secure a small business loan. The first lender is offering 11% compounded weekly, whereas the second lender is offering 11.25% compounded semi-annually and the third lender is offering 11.6% compounded annually. Mark chose the loan that offers the lower effective rate.

What is the effective rate of the loan that he chose?

QUESTION 17

1. Today Dante and Sharon had their first child and they want to begin savings for their child's education. With all the expenses of having a new child they feel they can only afford to put away $75 a month but they plan to continue doing so until the child turns 18. They are budgeting for an interest rate of 2.8%, compounded monthly.

How much money will they have in the account by their child's 18^th birthday?

How much interest will be earned?

QUESTION 18

1. Sharon convinces Dante that because school is both very expensive and very important, they must try to save a little more each month. The review their budget once more and decide that increasing their payments to $125 each month is manageable.

How much will they have saved by their child's 18^th birthday now that they have increased their payments?

How much interest will be earned?

QUESTION 19

1. Ishan and Hazel plan to retire at age 60 with a retirement income of $48,000 a year from their savings. Rather than pay themselves the whole amount at the beginning of each year, they have decided that payment at the beginning of each quarter of $12,000 gives them the right balance of flexibility and maximized interest earnings. They feel they can safely earn an interest rate of 8%, compounded quarterly, on their money and they are budgeting based on the prediction that they will live until they are 90 years old.

How much money will they have to have saved by the time they are 60 in order to fulfill this plan?

If the same total calculated above was to be saved, but no interest earned whatsoever, how much would be available to live on each quarter?

If the full 30 years are lived and quarterly budget spent, how much money in total will have been utilized in retirement?

How much will have been earned in interest?

QUESTION 20

1. Now that Ishan and Hazel have their saving goal calculated they want to start budgeting to reach that goal. They are 40 years old currently, so they have just 20 years to save up the total they calculated they would require so that they can still reach their goal of retirement by age 60.

If they assume the same interest rate, and make deposits into their savings at the beginning of every month, how much would their deposit have to be each month?

How much interest will be earned?