﻿ Test 3

## MAT 120 Sample Finance Test

1. (20 pts.) The wholesale price of a refrigerator is \$350.

a. What is the retail price if the retailer applies a 22% markup?

b. If the refrigerator goes on sale at 15% off, what is the sale price?

c. If the retailer includes the refrigerator in a BLOWOUT SALE at 5% off the already low sale price, what is the blowout sale price?

d. If a consumer buys the refrigerator at the blowout sale price and the final cost including sales tax is \$362.90, find the sales tax rate as a percent to 2 decimal places.

For problems 2 through 7, find the solutions using a calculator and using Excel. In Excel, generate a table for each problem showing the period-by-period details. Create a line chart illustrating how the final balance changes over time. Don't forget to include appropriate titles, turn off the legend, a make sure that the vertical axis crosses at a tick mark. Don’t forget to round calculated periodic payments and the periodic interest payments to the nearest penny. These reminders will NOT appear on the actual test!

The actual test will only have four problems in this section and each problem will be worth 16 points. You will need to solve one of these four problems using a calculator and the others using Excel. You will have to generate the table and line chart for only one of your four problems. The table and chart will be worth an additional 16 points.

2. What is the cost of a \$500 savings bond that matures in eight years if it pays 6.2% interest compounded monthly? How much interest would you earn? What is the annual percentage yield of this investment (as a percent to 3 decimal places)? Create a table and chart illustrating the growth of the balance over time.

Use your Excel model to determine the interest rate if this savings bond cost \$350 to purchase.

3. If you invested \$120 a month into a savings account paying 3.4% compounded monthly, how much would you have in 10 years and how much interest would you have earned? What is the annual percentage yield of this investment (as a percent to 3 decimal places)? Create a table and chart illustrating the growth of the balance over time.

Use your Excel model to determine how long it would be until there was at least \$5,000 in the account.

4. How much could you borrow on a four year loan at 6.9% compounded monthly if you could afford to pay \$250 a month? How much interest would you pay? What is the annual percentage rate for this loan (as a percent to 3 decimal places)? Create a table and chart illustrating the growth of the balance over time.

Use your Excel model to determine the term of this loan if you wanted to borrow just \$8,000.

5. If you deposited \$1,000 in a savings account paying 5% compounded semiannually, how much would you have in 60 years and how much interest would you have earned? What is the annual percentage yield of this investment (as a percent to 3 decimal places)? Create a table and chart illustrating the growth of the balance over time.

Use your Excel model to determine what interest rate would be necessary to result in a future value of \$15,000.

6. How much would you have to invest each quarter at 4.1% compounded quarterly if your goal was to have \$50,000 in ten years? How much interest would you earn? What is the annual percentage yield of this investment (as a percent to 3 decimal places)? Create a table and chart illustrating the growth of the balance over time.

Use your Excel model to determine what interest rate would be needed if you could only afford to invest \$1,000 each quarter.

7. Find the monthly payments on a 25-year mortgage of \$180,000 if the interest rate is 7.1% compounded monthly. How much will you pay in interest? What is the annual percentage rate for this loan (as a percent to 3 decimal places)? Create a table and chart illustrating the growth of the balance over time.

Use your Excel model to determine how long it would take to pay off a mortgage of \$180,000 if you paid \$1,400 per month.