# 4A,4B,4C,4D

Bank A was offering simple interest at 4.75​% per​ year, which was clearly a better deal than the 4.75​% compound interest rate at Bank B.Choose the correct answer below.A.The statement does not make​ sense, because the simple interest pays the same amount as the compound interest at the same interest rate.B.The statement makes​ sense, because the simple interest pays more than the compound interest.C.The statement does not make​ sense, because the compound interest pays more than the simple interest.

C

The bank that pays the highest annual percentage rate​ (APR) is always the best deal.Choose the correct answer below.A.The statement makes sense because a higher APR always results in a higher annual percentage yield than an interest rate with a lower APR.B.The statement does not make sense​ because, depending on how often the interest is​ compounded, a lower APR could result in a higher annual percentage yield.Your answer is correct.C.The statement does not make sense because a higher APR always results in a lower annual percentage yield than an interest rate with a lower APR.

B

My bank paid an annual interest rate​ (APR) of 4​.0% but at the end of the year my account balance had grown by 4​.1%.Choose the correct answer below.A.This does not make​ sense, the annual interest rate​ (APR) is always the annual percentage yield​ (APY) and the interest rate paid on the balance.B.This makes​ sense, because the annual interest rate​ (APR) does not always match the annual percentage yield​ (APY).Your answer is correct.C.This does not make​ sense, the annual interest rate​ (APR) is always greater than the annual percentage yield​ (APY) and the interest rate paid on the balance.

B

You invest ​$2000 in an account that pays simple interest of 2​% for 20 years. 2,8000.02x2000=AAx10=2,800 What is a​ budget? A.A budget keeps track of how much money you are spending on your credit cards and any interest you are being charged and helps to determine how much interest you can afford to pay.B.A budget is a list of your monthly​ income, including​ wages, bank​ interest, and any other income such as​ once-per-year payments.C.A budget keeps track of how much money you have coming in and how much you have going out and helps to determine what adjustments need to be made.Your answer is correct.D.A budget is the value obtained from subtracting your monthly expenses from your monthly income. C Describe the​ four-step process of figuring out your monthly budget. Choose the correct answer below.A.​First, list all your monthly income.​ Next, list all your monthly expenses. Then subtract your total expenses from your total income to determine your net monthly cash flow.​ Finally, make adjustments as needed.Your answer is correct.B.​First, list all your monthly income.​ Next, list all your monthly expenses. Then add your total expenses to your total income to determine your net monthly cash flow.​ Finally, make adjustments as needed.C.​First, list all your monthly income.​ Next, list all your monthly expenses. Then subtract your total income from your total expenses to determine your net monthly cash flow.​ Finally, make adjustments as needed.D.​First, list all your monthly income.​ Next, list all your monthly credit card debt. Then subtract your total credit card debt from your total income to determine the amount of interest being paid each month.​ Finally, make adjustments as needed. A My vacation travel cost a total of ​$1320​, which I entered into my monthly budget as ​$55 per month.Choose the correct answer below.A.This statement does not make sense because the value entered into the monthly budget should be$ 110.Your answer is correct.B.This statement does not make sense because when making a monthly​ budget, expenses such as vacations should only be included for the month in which they are taken.C.This statement makes sense because when making a monthly budget comma a prorated amount for expenses that don't recur monthly comma such as vacations comma should be included.D.This statement does not make sense because when making a monthly​ budget, expenses such as vacations should be ignored since they are a small expense compared to other monthly expenses.

A

Brandon discovered that his daily routine of buying a slice of pizza and a soda at lunch was costing him more than ​$1500 per year.Choose the correct answer below.A.This statement makes sense because this would mean that a slice of pizza and a soda costs him about ​$41 a day.B.This statement makes sense because this would mean that a slice of pizza and a soda costs him about ​$4 a day.Your answer is correct.C.This statement does not make sense because this would mean that a slice of pizza and a soda costs him about ​$4 a day.D.This statement does not make sense because this would mean that a slice of pizza and a soda costs him about ​$41 a day. B A single​ 30-year-old woman with a monthly salary of ​$3000 spends ​$1020 per month on rent.LOADING... Click the icon to view the figure.Is the​ woman's spending pattern equal​ to, above, or below the national​ average?A.The spending pattern is above the national average.B.The spending pattern is equal to the national average.Your answer is correct.C.The spending pattern is below the national average. B A single 40​-year-old man with a monthly salary of ​$4000 spends ​$460 per month on health care.LOADING... Click the icon to view the figure.Is the​ man's spending pattern equal​ to, above, or below the national​ average?A.The spending pattern is below the national average.B.The spending pattern is above the national average.Your answer is correct.C.The spending pattern is equal to the national average. B Distinguish between the total return and the annual return on an investment. How do you calculate the annual​ return? Choose the correct answer below.A.The total return is the percentage change in the investment value. The annual return is the annual percentage yield​ (APY) that would give the same overall growth over Y years. The formula is annual return equals StartFraction left parenthesis Upper A minus Upper P right parenthesis Over Upper P EndFraction times 100 %annual return=(A−P)P×100%.B.The annual return is the percentage change in the investment value. The total return is the annual percentage yield​ (APY) that would give the same overall growth over Y years. The formula is annual return equals left parenthesis StartFraction Upper A Over Upper P EndFraction right parenthesis Superscript left parenthesis 1 divided by Upper Y right parenthesis Baseline minus 1annual return=AP(1/Y)−1.C.The total return is the percentage change in the investment value. The annual return is the annual percentage yield​ (APY) that would give the same overall growth over Y years. The formula is annual return equals left parenthesis Start Fraction Upper A Over Upper P End Fraction right parenthesis Superscript left parenthesis 1 divided by Upper Y right parenthesis Baseline minus 1 annual return=AP(1/Y)−1. C Give an example. Choose the correct answer below.A.An investor has a starting principal Pequals=​$3000 and an accumulated value of Aequals=​$8400 after Yequals=4 years. The annual return is annual return equals StartFraction left parenthesis$ 8400 minus $3000 right parenthesis Over$ 3000 EndFraction times 100 % equals 180 %annual return=($8400−$3000)$3000×100%=180%.B.An investor has a starting principal Pequals=​$3000 and an accumulated value of Aequals=​$8400 after Yequals=4 years. The annual return is zero.C.An investor has a starting principal Pequals=​$3000 and an accumulated value of Aequals=​$8400 after Yequals=4 years. The annual return is equal to how much he saves over the next four years.D.An investor has a starting principal Pequals=​$3000 and an accumulated value of Aequals=​$8400 after Yequals=4 years. The annual return is annual return equals left parenthesis StartFraction Upper A Over Upper P EndFraction right parenthesis Superscript 1 divided by Upper Y Baseline minus 1 equals left parenthesis StartFraction$ 8400 Over $3000 EndFraction right parenthesis Superscript 1 divided by 4 Baseline minus 1 equals RootIndex 4 StartRoot 2.8 EndRoot minus 1 almost equals 0.294 equals 29.4 %annual return=AP1/Y−1=$8400$30001/4−1=42.8−1≈0.294=29.4%. D I'm putting all my savings into stocks because stocks always outperform other types of investments over the long term.Choose the correct answer below.A.The statement does make sense because stocks historically outperform bonds and cash over the long term and investing in stocks is​ high-risk, which offers higher returns.B.The statement does not make sense because stocks never outperform bonds and cash over the long term.C.The statement does not make sense because although stocks historically outperform bonds and cash over the long​ term, investing in stocks is​ high-risk and there is no guarantee that the investment will yield a high return.Your answer is correct.D.The statement does make sense because stocks are a​ low-risk investment, offering predictable low returns. C Why is it so important to understand your personal​ finances?A.It is important to understand your personal finances because understanding your personal finances will prevent divorce and other difficulties in personal relationships.B.It is important to understand your personal finances because you need to know what your credit card interest is so that you can pay the balance off quicker. Once the balance is paid​ off, you can then invest in the stock market.C.It is important to understand your personal finances because there will be an exam at the end of the term.D.It is important to understand your personal finances because you need to know how much money you have and how much money you spend in order to find a way to live within your means. D What types of problems are more common among people who do not have their finances under​ control?A.People who do not have their finances under control suffer from financial​ stress, higher divorce​ rates, and other difficulties in personal relationships. They also suffer from higher rates of depression among a variety of other ailments.Your answer is correct.B.People who do not have their finances under control suffer from financial​ stress, and have less friends. They also suffer from higher interest rates.C.People who do not have their finances under control have higher marriage​ rates, and no difficulty in personal relationships.​ However, they tend to suffer from higher rates of depression among a variety of other ailments.D.People who do not have their finances under control suffer from financial stress because they usually have to pay an accountant to balance their checkbooks. A What is a​ budget?A.A budget keeps track of how much money you have coming in and how much you have going out and helps to determine what adjustments need to be made.Your answer is correct.B.A budget keeps track of how much money you are spending on your credit cards and any interest you are being charged and helps to determine how much interest you can afford to pay.C.A budget is the value obtained from subtracting your monthly expenses from your monthly income.D.A budget is a list of your monthly​ income, including​ wages, bank​ interest, and any other income such as​ once-per-year payments. A Describe the​ four-step process of figuring out your monthly budget. Choose the correct answer below.A.​First, list all your monthly income.​ Next, list all your monthly expenses. Then subtract your total income from your total expenses to determine your net monthly cash flow.​ Finally, make adjustments as needed.B.​First, list all your monthly income.​ Next, list all your monthly credit card debt. Then subtract your total credit card debt from your total income to determine the amount of interest being paid each month.​ Finally, make adjustments as needed.C.​First, list all your monthly income.​ Next, list all your monthly expenses. Then subtract your total expenses from your total income to determine your net monthly cash flow.​ Finally, make adjustments as needed.This is the correct answer.D.​First, list all your monthly income.​ Next, list all your monthly expenses. Then add your total expenses to your total income to determine your net monthly cash flow.​ Finally, make adjustments as needed. C Summarize how average spending patterns change with age. Choose the correct answer below.A.As people get​ older, they tend to spend more on clothing and services than younger people. They also tend to spend less on food and housing than younger people.B.As people get​ older, they tend to spend more on health care and donations to charity than younger people. They also tend to spend less on personal​insurance, pensions,​ clothing, and services than younger people.This is the correct answer.C.As people get​ older, they tend to spend more on transportation and housing than younger people. They also tend to spend less on health care.D.As people get​ older, they tend to spend more on food and entertainment than younger people. They also tend to spend less on housing than younger people.Your answer is not correct.How can comparing your own spending to average spending patterns help you evaluate your​ budget? B How can comparing your own spending to average spending patterns help you evaluate your​ budget?A.If you are spending a higher percentage of your money on an item in your budget than the average​ person, you might want to consider finding​ lower-cost options or adjusting your budget.Your answer is correct.B.If you are spending a higher percentage of your money on entertainment than the average​ person, you might be able to find cheaper ticket prices if you ask around.C.It can be useful to check how you compare to the rest of the population. If you notice that most people donate less than you do to​ charity, it might be time to stop giving away so much.D.It is a good idea to check how you compare to the rest of the population. If you find that people spend more than you on​ gas, you can give others advice on how to spend less. A When I figured out my monthly​ budget, I included only my rent and my spending on​ gasoline, because nothing else could possibly add up to much.Choose the correct answer below.A.This statement makes sense because rent and gas are the only expensive items on her list.B.This statement does not make sense because rent and gas prices are constantly on the rise.C.This statement does not make sense because everything she buys during the month will affect her monthly costs and overall cash flow.Your answer is correct.D.This statement makes sense because everything else she buys is so inexpensive that her monthly cash flow will not be affected. C My monthly cash flow was minus−​$116116​, which explained why my credit card debt kept rising.Choose the correct answer below.A.This statement makes sense if the credit card balance is ​$116116.B.This statement does not make sense because he incorrectly calculated his monthly cash flow.C.This statement makes sense because a cash flow of minus−​$116116 means that if he​ doesn't have any money​ saved, then any money he spends must be borrowed from a credit card.Your answer is correct.D.This statement does not make sense because minus−​$116116 is not a real dollar amount. C My vacation travel cost a total of ​$18001800​, which I entered into my monthly budget as ​$180180 per month.Choose the correct answer below.A.This statement makesmakes sense because when making a monthly budget comma a proratedwhen making a monthly budget, a prorated amount for expenses that don't recur monthly comma such as vacations comma should be included.amount for expenses that don't recur monthly, such as vacations, should be included.B.This statement does not make sense because when making a monthly​ budget, expenses such as vacations should be ignored since they are a small expense compared to other monthly expenses.C.This statement does not make sense because when making a monthly​ budget, expenses such as vacations should only be included for the month in which they are taken.D.This statement does not makedoes not make sense because the value entered into the monthly budgetthe value entered into the monthly budget should be$ 150.

D

Emma and Emily are good friends who do everything​ together, spending the same amount on eating​ out, entertainment, and other leisure activities. Yet Emma has a negative monthly cash flow while​ Emily's is​ positive, because Emily has more income.Choose the correct answer below.A.The statement makes sense because even though Emma and Emily spend the same amount on entertainment​ expenses, they may spend different amounts on other expenses. Regardless of​ income, Emma's and​ Emily's cash flows could be positive or negative.This is the correct answer.B.This statement does not make sense because Emma uses a credit card for her expenses and Emily uses cash for her expenses.C.This statement does not make sense because​ Emily's rent could be lower than​ Emma's, which means that she will have a greater monthly cash flow.D.This statement makes sense because Emily makes more money than​ Emma, so she has a greater cash flow at the end of the month.

A

Brandon discovered that his daily routine of buying a slice of pizza and a soda at lunch was costing him more than ​$18 comma 00018,000 per year.Choose the correct answer below.A.This statement makesmakes sense because this would mean that a slice of pizza and a soda costs him about ​$4949 a day.B.This statement does not make sense because this would mean that a slice of pizza and a soda costs him about ​$55 a day.C.This statement makes sense because this would mean that a slice of pizza and a soda costs him about ​$55 a day.D.This statement does not makedoes not make sense because this would mean that a slice of pizza and a soda costs him about ​$4949 a day. D I bought the cheapest health insurance I could​ find, because​ that's sure to be the best option for my​ long-term financial success.Choose the correct answer below.A.This statement does not make sense because health insurance is very expensive. If he really wants to save​ money, he should drop the insurance plan and hold on to his money.B.This statement makes sense because if he gets​ sick, the overall cost will be a lot less because he has an inexpensive health insurance plan.C.This statement makes sense because there is no need to buy expensive health insurance. The cheapest plan is good​ enough, and it will save you money in the long run.D.This statement does not make sense because the cheapest health insurance plans do not cover as much as the more expensive insurance plans. If he gets​sick, he might end up paying more money than he would if he had a more expensive plan. D What will evaluating your monthly budget help you​ learn?Choose the correct answer below.A.You learn how to earn more money. You may realize that you should start working more hours every week to increase your monthly cash flow.B.You learn how to keep your personal spending under control. Once you evaluate your current​ budget, you'll almost certainly want to make changes to improve your cash flow.C.You learn how to keep your personal spending under control. You could be spending a lot more in certain categories than you had imagined and that the items you thought were causing the biggest difficulties are small compared to other items.Your answer is correct.D.You learn how to make better investments. You may notice that you made a poor investment that is causing you to lose money every month.E.You learn how to make better investments. You may notice that you are spending a higher percentage of your money on entertainment than the average person.F.You learn how to earn more money. You may figure out that you are good at managing​ finances, and then become a wealthy financial advisor. C What does a negative monthly cash flow​ mean?Choose the correct answer below.A.It means your investments are losing value. When the interest rates​ decrease, your cash flow becomes negative.B.It means you are spending more money than you are taking in. When you subtract your total expenses from your total​ income, the difference is negative.Your answer is correct.C.It means your investments are losing value. Each month you lose a percentage of the money that you​ invested, which is the reason for the negative cash flow.D.It means you are spending more money than you are taking in. When you subtract your total expenses from your total​ income, the difference is positive.E.It means you are taking in more money than you are spending. When you subtract your total expenses from your total​ income, the difference is negative.F.It means you are taking in more money than you are spending. When you subtract your total expenses from your total​ income, the difference is positive. B Choose the correct answer below.A.The single biggest category is entertainment. The average person spends​ 8% of his or her income on entertainment.B.The single biggest category is food. The average person uses​ 23%-43% of his or her income on food.C.The single biggest category is housing. The average person uses​ 33% of his or her income on housing.Your answer is correct.D.The single biggest category is entertainment. The average person has not yet considered finding​ lower-cost entertainment options.E.The single biggest category is housing. The average person uses​ 23% of his or her income on housing.F.The single biggest category is food. The average person uses​ 46%-66% of his or her income on food. C Which of the following is necessary if you want to make monthly contributions to​ savings?Choose the correct answer below.A.You must not owe money on any loans. This means that you are not spending any money toward interest. If you are not paying​ interest, you have money to save.B.You must be spending less than​ 20% of your income on food and clothing. As long as you​ don't increase your spending in any other​ category, you should be able to find money to save.C.You must have a positive monthly cash flow. If you have a positive monthly cash​ flow, you can pay more towards your credit card balance. Once the balance is​ zero, you should start putting that extra money in the bank.D.You must not owe money on any loans. If you do not owe any money on​ loans, you will have money left over at the end of each​ month, which you can use for savings.E.You must be spending less than​ 20% of your income on food and clothing. Spending less on food and clothing will increase cash flow exponentially every month.F.You must have a positive monthly cash flow. If your cash flow is​ positive, you will have money left over at the end of each​ month, which you can use for savings. F You drive an average of 414414 miles per week in a car that gets 1616 miles per gallon. With gasoline priced at ​$33 per​ gallon, approximately how much would you save each year on gas if you instead had a car that got 4949 miles per​ gallon?Choose the correct answer below.A.You would save ​$37183718​, the sum of the yearly cost at 1616 ​mpg, and the yearly cost at 4949 mpg.B.You would save ​$27182718​, the sum of the yearly cost at 1616 ​mpg, and the yearly cost at 4949 mpg.C.You would save ​$37183718​, the difference between the yearly cost at 1616 ​mpg, and the yearly cost at 4949 mpg.D.You would save ​$17181718​, the difference between the yearly cost at 1616 ​mpg, and the yearly cost at 4949 mpg.Your answer is not correct.E.You would save ​$17181718​, the sum of the yearly cost at 1616 ​mpg, and the yearly cost at 4949 mpg.F.You would save ​$27182718​, the difference between the yearly cost at 1616 ​mpg, and the yearly cost at 4949 mpg.

F

What is the difference between simple interest and compound​ interest? Why do you end up with more money with compound​ interest?Choose the correct answer below.A.Simple interest is interest paid only on the original investment whereas compound interest is interest paid both on the original investment and on all interest that has been added to the original investment. Since compound interest is calculated based on a larger amount than simple​ interest, it results in a larger amount of money over time.This is the correct answer.B.Simple interest is interest paid at a fixed rate over time whereas compound interest fluctuates over time. Since the rates for compound interest are always​increasing, it results in a larger amount of money over time compared to simple interest.Your answer is not correct.C.Simple interest is interest paid both on the original investment and on all interest that has been added to the original investment whereas compound interest is interest paid only on the original investment. Since compound interest is calculated based on a smaller​ amount, it results in a larger amount of money over time.D.Simple interest is interest paid only on​ 50% of the original investment whereas compound interest is interest paid only on​ 100% of the original investment. Since compound interest is calculated based on a larger amount than simple​ interest, it results in a larger amount of money over time.

A

Explain why the term​ APR/n appears in the compound interest formula for interest paid n times a year.Choose the correct answer below.A.APR represents the annual principle rate. Since the APR is the total amount of interest earned in a​ year, it needs to be divided by the number of compounding periods per year comma n.year, n.B.APR represents the annual percentage rate​ (as a​ decimal). To account for the interest paid n times a​ year, this annual​ (yearly) rate needs to be divided by the number of compounding periods per​ year, n.This is the correct answer.C.APR represents the annual principle rate. The APR represents the original investment and must be divided by the number of compounding periods per​ year, n, in order to determine the yearly compounded interest rate.D.APR represents the annual percentage rate​ (as a​ decimal). Since the APR represents a yearlong​ rate, to account for​ fluctuation, the rate needs to be divided by the number of compounding periods per​ year, n.

B

Define the variables in the compound interest formula for interest paid more than once a year. Choose the correct answer below.A.A is the accumulated balance after Y​ years, P is the starting​ principal, APR is the annual percentage rate​ (as a​ decimal), n is the number of compounding periods per​ year, and Y is the number of years.This is the correct answer.B.A is the accumulated balance after Y​ years, P is the starting​ principal, APR is the annual percentage rate​ (as a​ decimal), Y is the number of​ years, and e is a special irrational number with a value of ealmost equals≈2.71828.Your answer is not correct.C.A is the accumulated balance after Y​ years, P is the starting​ principal, APR is the annual percentage rate​ (as a​ decimal), and Y is the number of years.

A

What is continuous​ compounding? How does the APY for continuous compounding compare to the APY​ for, say, daily​ compounding? Explain the formula for continuous compounding.Choose the correct answer below.A.Compounding daily is also known as continuous compounding. The APY for continuous compounding is equivalent to the APY for daily compounding. The formula for continuous compounding is also known as the compound interest formula.Your answer is not correct.B.Compounding infinitely many times per year is called continuous compounding. The APY for continuous compounding is only slightly larger than the APY for daily compounding. The formula for continuous compounding is a special form of the compound interest formula.This is the correct answer.C.Compounding twice daily is called continuous compounding. The APY for continuous compounding is only slightly larger than the APY for daily compounding. The formula for continuous compounding is a special form of the simple interest formula.D.Compounding at least once per year is called continuous compounding. The APY for continuous compounding is smaller than the APY for daily compounding. The formula for continuous compounding is also known as the compound interest formula.

B

Consider two​ investments, one earning simple interest and one earning compound interest. If both start with the same initial deposit​ (and you make no other deposits or​ withdrawals) and earn the same annual interest​ rate, how will the balance in the simple interest account compare to that of the compound​ interest?Choose the correct answer below.A.The account with simple interest will have a greater balance than the account with compound interest because compound interest is interest paid only on the original investment.B.The account with simple interest will have a smaller balance than the account with compound interest because compound interest is interest paid both on the original investment and on all interest that has been added to the original investment.Your answer is correct.C.The account with simple interest will have the same balance as the account with compound interest because the initial deposits are equal.D.The account with simple interest will have the same balance as the account with compound interest because the annual interest rates are equal.E.The account with simple interest will have a smaller balance than the account with compound interest because the more times interest is applied to an​investment, the smaller the balance.

B

After twotwo ​years, an investment with interest compounded annually and an APR of 4.74.7​% increases in value by which​ factor?Choose the correct answer below.The factor is 1.047 squared1.0472.

A

With the same​ deposit, APR, and length of​ time, an investment with monthly compounding will yield what​ amount?Choose the correct answer below.A.The monthly compounding yields a smaller balance than an account with quarterly compounding because more compounding means a higher yield.B.The monthly compounding yields a greater balance than an account with daily compounding because more compounding means a lower yield.C.The monthly compounding yields a smaller balance than an account with quarterly compounding because more compounding means a lower yield.D.The monthly compounding yields a greater balance than an account with daily compounding because more compounding means a higher yield.E.The monthly compounding yields a greater balance than an account with annual compounding because more compounding means a lower yield.F.The monthly compounding yields a greater balance than an account with annual compounding because more compounding means a higher yield.

F

Consider two accounts earning compound​ interest, one with an APR of 66​% and the other with an APR of 33​%, both with the same initial deposit​ (and no further deposits or​ withdrawals). After twenty​ years, how much more interest will the account with APRequals=66​% have earned than the account with APRequals=33​%?Choose the correct answer below.A.Less than twice as muchB.More than twice as muchYour answer is correct.C.Exactly twice as much

B

Suppose you use the compound interest formula to calculate how much you must deposit into a college fund today if you want it to grow in value to ​$25 comma 00025,000 in ten years. What does the calculation​ assume?Choose the correct answer below.A.The fund has continuous compounding because it is not clearly stated in the given situation.B.The fund has continuous compounding because the formula is invalid for simple interest.C.The calculation assumes that the average APR remains constant for ten years because it is extremely difficult to find investments with a constant interest rate.Your answer is correct.D.The fund earns simple interest rather than compound interest because compound interest rates cannot be predicted with any certainty.E.The fund earns simple interest rather than compound interest because no such formula exists to predict the growth of investments that use compound interest.F.The calculation assumes that the average APR remains constant for ten years because the formula does not use APR when calculating this value. C My financial advisor showed me that I could reach my retirement goal with deposits of ​$232232 per month and an average return of 55​%. But I​ don't want to deposit that much of my​ paycheck, so​ I'm going to reach the same goal by getting an average annual return of 1111​% instead.Choose the correct answer below.A.This makes sense because 1111​% of ​$232232 is greater than 55​% of ​$232232.Your answer is not correct.B.This does not make sense because ​$232232 is not a lot of money to earn interest off of.C.This does not make sense because you cannot choose your own annual rate of return.This is the correct answer.D.This makes sense because an average annual return of 1111​% is greater than 55​%. C ​I'm putting all my savings into stocks because stocks always outperform other types of investments over the long term.Choose the correct answer below.A.The statement does not make sense because stocks never outperform bonds and cash over the long term.B.The statement does make sense because stocks are a​ low-risk investment, offering predictable low returns.C.The statement does not make sense because although stocks historically outperform bonds and cash over the long​ term, investing in stocks is​ high-risk and there is no guarantee that the investment will yield a high return.Your answer is correct.D.The statement does make sense because stocks historically outperform bonds and cash over the long term and investing in stocks is​ high-risk, which offers higher returns. C I bought a fund advertised on the web that says it uses a secret investment strategy to get an annual return twice that of​ stocks, with no risk at all.Choose the correct answer below.A.The statement does make sense because the strategy indicates that the return is a predictable​ amount, thus the fund advertised on the web is a​ no-risk investment.B.The statement does make sense because this secret investing strategy must be a new financial planning strategy that does not incorporate the three traditional investment​ considerations: liquidity,​ risk, and return.C.The statement does not make sense because investing in stocks is​ low-risk to get high​ returns, thus getting higher returns than stocks with this secret strategy must mean the fund advertised on the web is​ low-risk, not no risk.Your answer is not correct.D.The statement does not make sense because investing in stocks is​ high-risk to get high​ returns, thus getting higher returns than stocks with this secret strategy must mean the fund advertised on the web is​ high-risk, not no risk. D ​I'm already​ retired, so I need​ low-risk investments.​ That's why I put most of my money in U.S. Treasury​ bills, notes, and bonds.Choose the correct answer below.A.This does not make sense because U.S Treasury bills are different than notes and bonds. The U.S Treasury bills are​ low-risk while the notes and bonds are​high-risk.B.This makes sense because the safest investments are federally insured bank accounts and U.S. Treasury​ bills; there's virtually no risk of losing the principal invested.Your answer is correct.C.This makes sense because​ low-risk is a smart choice for a retired person with limited monthly income.D.This does not make sense because U.S. Treasury​ bills, notes, and bonds are​ high-risk investments that offer prospects of higher​ returns, along with the possibility of losing the principal. B In the savings plan​ formula, assuming all other variables are​ constant, what happens to the accumulated balance in the savings​ account?Choose the correct answer below.A.It decreases as Y increases. As the amount of years of saving​ increases, the accumulated savings decrease.B.It increases as APR decreases. As APR​ decreases, the amount of interest paid will be less.​ Therefore, more accumulated savings will be made.Your answer is not correct.C.It increases as n increases. If less payments are made per​ year, more money will be saved.D.It decreases as Y increases. As the​ exponent, n, in the numerator​ increases, Y must decrease to keep the formula true.E.It increases as APR decreases. As n​ increases, APR over n decreases causing the accumulated balance the increase.F.It increases as n increases. As n​ increases, the denominator decreases and the exponent in the numerator increases. This makes the accumulated balance increase. F What is the total return on a 99​-year ​investment?Choose the correct answer below.A.It is the value of the investment after 99 years. Time is the only factor that affects total return. As the length of time of the investment​ increases, the total return increases.B.It is the difference between the final and initial values of the investment. The initial value is how much was invested and the final value is equal to the initial value plus the total return.Your answer is not correct.C.It is the value of the investment after 99 years. The total return is equal to the overall growth over Y years.D.It is the relative change in the value of the investment. The total return shows the percentage change as the value of the investment changes.This is the correct answer.E.It is the difference between the final and initial values of the investment. This shows how much money was made from the initial investment after 99 years.F.It is the relative change in the value of the investment.​ Then, subtract one from this value to determine the annual return. D Suppose you deposited ​$100100 per month into a savings plan for 1212 years and at the end of that period your balance was ​$22 comma 80022,800. What was the amount you earned in​interest?Choose the correct answer below.A.It is impossible to compute without knowing the APR. To find the correct​ answer, multiply each ​$100100 deposit by the​ APR, and then multiply the product by the number of months in 1212 years.B.It was ​$16 comma 80016,800. Calculate the amount deposited over 1212 years and then add it to the balance of ​$22 comma 80022,800.C.It was ​$8 comma 4008,400. Calculate the amount deposited over 1212 years and then subtract it from the balance of ​$22 comma 80022,800.This is the correct answer.D.It was ​$16 comma 80016,800. Multiply the balance of ​$22 comma 80022,800 by the number of​ years, 1212.E.It is impossible to compute without knowing the APR. To find the correct​ answer, divide the number of payments by the APR.F.It was ​$8 comma 4008,400. Divide the balance of ​$22 comma 80022,800 by the number of​ years, 1212.

C

Company A has 44 million shares outstanding and a share price of ​$1111 company B has 4040 million shares outstanding and a share price of ​$1010. Company C has 200 comma 000200,000 shares outstanding and a share price of ​$110110. Which company has the greatest market​ capitalization?Choose the correct answer below.A.Company B has the greatest market capitalization. Company​ B's outstanding shares and share price are in the middle range.​ It's safer to choose a moderate number of shares and a moderate share​ price, rather than go to an extreme.B.Company C has the greatest market capitalization. Company C has a lower number of outstanding shares and a higher share price compared to the other two companies.Your answer is not correct.C.Company C has the greatest market capitalization. The ratio of outstanding share to share price is the greatest for company C.D.Company A has the greatest market capitalization. The ratio of outstanding share to share price is the greatest for company A.E.Company A has the greatest market capitalization. Company A has a realistic amount of outstanding shares and a low share price compared to the other two companies.F.Company B has the greatest market capitalization. Company B has a higher number of outstanding shares and a lower share price than the other two companies. F What is the price you pay for a bond with a face value of ​$30003000 selling at 110110 ​points?Choose the correct answer below.A.It is ​$31303130. Multiply the face value by 110110​%.Your answer is not correct.B.It is ​$34503450. Divide the face value by 110110 points.C.It is ​$31303130. Divide the face value by 110110 points.D.It is ​$34503450. Multiply the face value by 110110​%.E.It is ​$33003300. Divide the face value by 110110 points.F.It is ​$33003300. Multiply the face value by 110110​%.

F

Suppose you pay only the interest on a loan. Will the loan ever be paid​ off? Why or why​ not?Choose the correct answer below.A.No. Interest increases consistently throughout the term of the loan.B.Yes. If only the interest is​ paid, the principal will decrease over time.C.Yes. All payments are split evenly between interest and principal.D.No. If only the interest is​ paid, the principal never decreases.

D

What is an installment​ loan? Explain the meaning and use of the loan payment formula.Choose the correct answer below.A.An installment loan is an amount of money installed electronically into a bank account.B.An installment loan is the amount of money owed at any particular time.Your answer is not correct.C.An installment loan is the time you have to pay back a loan in full.D.An installment loan is a loan that is paid off with equal regular payments.

D

Explain the meaning and use of the loan payment formula. Choose the correct answer below.A.The loan payment formula is used to calculate equal monthly payments as the interest paid decreases and principal decreases.This is the correct answer.B.The loan payment formula is used to calculate equal monthly payments as the interest paid varies and principal increases.C.The loan payment formula is used to calculate annual payments as the interest paid decreases and principal decreases.Your answer is not correct.D.The loan payment formula is used to calculate annual payments as the interest paid varies and principal increases.

A

D

How do credit card loans differ from ordinary installment​ loans? Why are credit card loans particularly​ dangerous?How do credit card loans differ from ordinary installment​ loans?A.Credit card loans differ from installment loans in that you are required to pay off your balance at the end of each 25 to 30 day grace period.B.Credit card loans differ from installment loans in that you are not required to pay off your balance in any set period of time.Your answer is correct.C.Credit card loans differ from installment loans in that credit cards charge an annual​ fee, and often raise the interest rate.D.Credit card loans differ from installment loans in that you are required to pay off your balance at the end of each month.

B

Why are credit card loans particularly​ dangerous?A.Credit card loans are particularly dangerous because they have very high interest rates compared to other types of​ loans, so it is easy to get into financial trouble.This is the correct answer.B.Credit card loans are particularly dangerous because they charge an annual​ fee, and often raise the interest rate.Your answer is not correct.C.Credit card loans are particularly dangerous because they​ don't require equal monthly​ payments, so many people never pay off their balance.D.Credit card loans are particularly dangerous because they can be used as identification to rent a car.

A

The interest rate on my student loan is only​ 7%, yet more than half of my payments are currently going toward interest rather than principal.Choose the correct answer below.A.The statement makes sense. The portions of installment loan payments going towards principal and toward interest vary as the loan is paid down.This is the correct answer.B.The statement does not make sense. Principal is always paid off entirely before any payments go toward interest.C.The statement makes sense. A much larger portion of every payment goes towards​ interest, regardless of the interest rate.Your answer is not correct.D.The statement does not make sense. For every​ payment, 7% goes towards interest and​ 93% goes towards principal.

A

My student loans were all 2020​-year loans at interest rates of 77​% or​ above, so when my bank offered me a 2020​-year loan at 22​%, I took it and used it to pay off the student loans.Choose the correct answer below.A.This does not make sense because the interest rates of the other student loans are not given.B.This makes sense because the bank loan has the same loan term with a lower interest rate.Your answer is correct.C.This does not make sense because the student loans have different loan terms with varying interest rates.D.This makes sense because the bank loan has a lower loan term with a lower interest rate.

B

C

Fixed rate loans with​ 15-year terms have lower interest rates than loans with​ 30-year terms, so it always makes sense to take the​ 15-year loan.Choose the correct answer below.A.This makes sense because it is always better to have loans with short loan terms. A borrower could pay off the loan in 15​ years, and then spend the next 15 years saving money.B.This does not make sense because​ 15-year loans​ don't usually have lower interest rates. The lenders would never be able to profit if the interest rates of these loans were less than those of​ 30-year loans.C.This makes sense because paying a lower interest rate for a short period of time is not as costly as paying a higher interest rate for a long period of time.D.This does not make sense because the monthly payments for the​ 15-year loan are much greater than a​ 30-year loan, even at a lower interest rate. Even though the interest is higher for​ 30-year loans, the borrower could pay more toward the principal each month with the option of paying the lower monthly payment if finances are poor one month.

D

In the loan payment​ formula, assuming all other variables are​ constant, the monthly payment does​ what?Choose the correct answer below.A.The monthly payment increases as APR increases. As the amount borrowed​ increases, the numerator of the PMT equation becomes larger and​ thus, the APR increases.Your answer is not correct.B.The monthly payment increases as P increases because in the loan payment​ formula, P is the regular monthly payment.C.The monthly payment increases as Y increases. As the exponent in the denominator​ increases, the regular monthly payments increase.D.The monthly payment increases as APR increases. As the exponent in the denominator​ increases, the APR increases.E.The monthly payment increases as P increases. As the amount borrowed​ increases, the numerator of the PMT equation becomes larger and​ thus, the PMT increases.This is the correct answer.F.The monthly payment increases as Y increases. As the amount borrowed​ increases, the numerator of the PMT equation becomes larger and​ thus, Y increases.

E

With the same term and amount​ borrowed, what will a loan with a higher APR​ have?Choose the correct answer below.A.There will be a monthly payment that could be greater or less than that of a loan with a lower APR. There are several other factors that the calculated regular monthly payment amount depends on.B.There will be a higher monthly payment than a loan with a lower APR because a higher APR means a greater amount of interest paid each month.This is the correct answer.C.There will be a higher monthly payment than a loan with a lower APR. The APR in the numerator of the loan payment formula​ increases, so the regular monthly payment decreases.D.There will be a lower monthly payment than a loan with a lower APR. The number of payment periods per year is smaller when the APR is higher.E.There will be a monthly payment that could be greater or less than that of a loan with a lower APR. The APR is in both the numerator and the​ denominator, so it is hard to tell.F.There will be a lower monthly payment than a loan with a lower APR because a higher APR means a greater value in the denominator of the loan payment formula.

B

If you make monthly payments of​ $1000 on a​ 10-year loan, what will your total payments over the life of the loan amount​ to?Choose the correct answer below.A.The total payments over the life of the loan amount to​$100,000. The borrower paid​ $1000 for 10 years.B.The total payments over the life of the loan amount to​$10,000. The borrower paid​ $1000 each year for 10 years.Your answer is not correct.C.The total payments over the life of the loan amount to​$10,000. Multiply​ $1000 by 10 years to find the total amount.D.The total payments over the life of the loan amount to​$120,000. The borrower paid​ $1000 twenty-four times per year for 10 years.E.The total payments over the life of the loan amount to​$100,000. Multiply​ $1000 by 100 because there were 100 payment periods during the life of the loan.F.The total payments over the life of the loan amount to​$120,000. Multiply​ $1000 per month by 12 months per year by 10 years to find the total amount. F What does a loan of ​$100 comma 000100,000 that carries a 44​-point origination fee require as an advance​ payment?Choose the correct answer below.A.An advance payment of ​$4 comma 0004,000 is required. Each point is​ 10% of the loan​ amount, so the advance payment amount is 44​0% of ​$100 comma 000100,000.B.An advance payment of ​$2 comma 0002,000 is required. Each point is​ 1% of the loan​ amount, so the advance payment amount is 44​% of ​$100 comma 000100,000.C.An advance payment of ​$400400 is required. Each point is​ 1% of the loan​ amount, so the advance payment amount is 44​% of ​$100 comma 000100,000.Your answer is not correct.D.An advance payment of ​$4 comma 0004,000 is required. Each point is​ 1% of the loan​ amount, so the advance payment amount is 44​% of ​$100 comma 000100,000.This is the correct answer.E.An advance payment of ​$2 comma 0002,000 is required. Each point is​ 10% of the loan​ amount, so the advance payment amount is 44​0% of ​$100 comma 000100,000.F.An advance payment of ​$400400 is required. Each point is worth between 50 and 100 points depending on the prepayment penalties. D ou are currently paying off a student loan with an interest rate of 1010​% and a monthly payment of ​$400400. You are offered the chance to refinance the remaining balance with a new 1515​-year loan with an interest rate of 55​% that will give you significantly lower monthly payment. Is refinancing this way a good​ idea?Choose the correct answer below.A.​It's a good idea if it lowers your monthly payment by at least​ $100. The costs of refinancing can be​ high, so​ it's not worth it if the monthly payment​ won't change by a lot.B.It may or may not be a good​ idea, depending on closing costs and how many years are remaining in your current loan term. Refinancing would reset the loan term to 1515 years.This is the correct answer.C.​It's a good idea if it lowers your monthly payment by at least​$100. Then if you pay the​ \$100 anyway, you can pay off the loan sooner.Your answer is not correct.D.​It's always a good idea. A borrower should always seek the lowest interest rate possible.E.It may or may not be a good​ idea, depending on closing costs and how many years are remaining in your current loan term.​ It's only a good idea if closing costs are minimal.F.It is always a good idea because you would save 55​% each month.

B