Topic Test Answers

Cindy would like to borrow money from her bank to restore her collectible car. It will take $12,000 to fully restore the car. Cindy's bank offers secured loans at 89% of the collateral value. How much collateral does Cindy need to offer to get a loan big enough to allow her to fully restore her car?

Kurtis is expecting a promotion which, hopefully, comes with a raise. He would like his raise to help him correct a high debt-to-income (DTI) ratio of 43%. His current annual salary is $53,000. How much of a raise would Kurtis need applied to his annual salary to get his DTI ratio down to a more reasonable 36%?

The following table shows the first segment of a five-year amortization schedule. After one year of payments, how much has been paid to interest?

Sally spends $1,500 each month on her mortgage, mortgage insurance and property taxes. She has three credit cards with minimum monthly payments that total to $125.00 and a monthly car payment for $349.00. She currently brings in a gross monthly income of 3,750.00 from her job. Calculate Sally’s debt-to-income (DTI) ratio.

Carlos took seven years to pay off his loan by making identical quarterly payments. The loan had a principal of $22,375 and 5.49% interest, compounded quarterly. Carlos paid a total of $28,821.67. How much did Carlos pay in service charges? Round all dollar values to the nearest cent.

Dave is considering two loans. Loan U has a nominal interest rate of 9.97%, and Loan V has a nominal interest rate of 10.16%. If Loan U is compounded daily and Loan V is compounded quarterly, which loan will have the lower effective interest rate, and how much lower will it be?

The following table shows a portion of a four-year amortization schedule. After twenty-five payments, how much of the principal has been paid off?

Jessica took out a Stafford loan worth $7,175 at the beginning of her six-year college career. The loan has a duration of ten years and an interest rate of 6.3%, compounded monthly. How much greater will Jessica’s monthly payment be if the loan is unsubsidized than if the loan is subsidized? Round all dollar values to the nearest cent.

Valerie is going to purchase a new car. The car she wants has a list price of $32,495. Valerie is planning to make a down payment of $1,877. Furthermore, she plans to trade in her current car, which is a 2006 Hyundai Sonata in good condition. She will finance the rest of the cost by making monthly payments over five years. She can finance the cost at a rate of 8.64%, compounded monthly. She will also have to pay 8.23% sales tax, a $2,243 vehicle registration fee, and a $314 documentation fee. If the dealer gives Valerie 87.5% of the trade-in price on her car, listed below, approximately how much will Valerie pay in total for her new car? (Round all dollar values to the nearest cent, and consider the trade-in to be a reduction in the amount paid.)Hyundai Cars in Good ConditionModel/Year2004200520062007Sonata$6,145$6,520$6,784$7,066Tiburon$6,880$7,144$7,382$7,785Elantra$4,211$4,425$4,598$4,880Accent$5,676$5,828$6,005$6,317

Sam would like to use his extensive stamp collection as collateral for a secured loan. Sam has documentation that says his stamp collection is worth $10,525.00. Sam's bank has a policy that permits loan officers to lend no more than 82.5% of the value of the collateral. What is the maximum loan amount Sam can get from his bank using his stamp collection as collateral?