Practice Questions

SHORT ANSWER. Write the word or phrase that best completes each statement or answers the question.

1) A loan payment of $1700 was due 60 days ago and another payment of $1200 is due 45 1)
days from now. What single payment 90 days from now will pay off the two obligation if
interest is to be 14% and the agreed focal date is 90 days from now?

2) Debt payments of $800.00 due now and $1400.00 due in five months are to be repaid by a 2)
payment of $1000.00 in three months and a final payment in eight months. Calculate the
size of the final payment if interest is 6%.

3) Debt payments of $2560.00 and $1965.00 are due four months from now and ten months 3)
from now respectively. What single payment is required to pay off the debt today if
interest is 5.94%?

4) Debt payments of $1000.00 due today, $500.00 due in 90 days, and $500.00 due in 120 days 4)
are to be combined into a single payment to be made 120 days from today. What is that
single payment if money is worth 9.00% p.a. and the agreed focal date is 120 days from
today?

5) Debt payments of $1925.00 due today, $510.00 due in 87 days, and $674.00 due in 337 days 5)
are to be combined into a single payment to be made 115 days from now. What is that
single payment if money is worth 8.65% p.a. and the agreed focal date is 115 days from
now?

6) Debt obligations of $700.00 due three months ago and $1810.00 due in one month are to be 6)
repaid by a payment of $1200.00 today and the balance in six months. What is the size of
the final payment if interest is 7.75% and the agreed focal date is one month from now?

7) Debts of $1480.00 due four months ago and $1385.00 due in one month are to be settled by 7)
two equal payments due now and nine months from now respectively. Find the size of the
equal payments at 12% p.a. with the agreed focal date now.

8) A loan of $1000 taken out on January 1 requires equal payments on February 1,March 1, 8)
and April 1. If the focal date is april 1, what is the size of the equal payments at 6.0%?

9) Payments of $1430 due one year ago and $1175 due with interest of 6% in nine months are 9)
to be settled by three equal payments due today, seven months from now, and one year
from now at 7.5%. Determine the size of the equal payments if the agreed focal date is one
year from today.

10) Payments of $5100 each due in five, ten, and fourteen months from now are to be settled by 10)
three equal payments due today, seven months from now, and eleven months from now.
What is the size of the equal payments if interest is 8.75% and the agreed focal date is
today?

11) A debt of $7120 is to be settled by two equal payments due today, and three years from 11)
now respectively. Determine the size of the equal payments if money is worth 8.73% and
the agreed focal day is today.

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Answer Key
Testname: UNTITLED1

1) Let the size of the single payment be $x.

The focal date is 90 days from now.
The equation of equivalence is
150 45
1700.00 1 + 0.14 + 1200.00 1 + 0.14 =x
365 365
1797.81 + 1220.71 = x
x = 3018.52
The single payment 90 days from now is $3018.52.
2) Use 8 months as the focal date and let $x represent the final payment.

5 8 3
1000 1 + 0.06 + x = 800 1 + 0.06 + 1400 1 + 0.06
12 12 12
1025 + x = 832 + 1421
x = 1228
The size of the payment is $1228.00.
3) Let the size of the single payment be $x.
The focal date is today.
2560 1965
+ =x
4 10
1 + 0.0594 1 + 0.0594
12 12
2510.30 + 1872.32 = x
4382.62 = x
The size of the single payment is $4382.62.
4) Let the single payment be $x.

120 30
x = 1000 1 + 0.09 + 500 1 + 0.09 + 500
365 365

x = 1029.59 + 503.70 + 500.00

x = $2033.29
5) Let the single payment be $x.

115 28 674
x = 1925 1 + 0.0865 + 510 1 + 0.0865 +
365 365 222
1 + 0.0865
365
x = 1977.46 + 513.38 + 640.31
x = $3131.15
6) Let the size of the final payment be $x.
The focal date is one month from now.
4 1 x
700 1 + 0.0775 + 1810.00 = 1200 1 + .0775 +
12 12 5
1 + 0.0775
12
x
718.08 + 1810.00 = 1207.75 +
1.03229167
1320.33 = .9687185x
1362.97 = x
The size of the final payment is $1362.97.

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Answer Key
Testname: UNTITLED1

7) Let the size of the equal payments be $x.

At the agreed focal date (now):

4 1385.00 x
1480.00 1 + 0.12 + =x+
12 1 9
1 + 0.12 1 + 0.12
12 12
1539.20 + 1371.29 = x + .9174312x
2910.49 = 1.9174312x
1517.91 = x
The size of the equal payments is $1517.91.
8) Let the size of the equal payments be $x.
Focal date is September 30.
Equation of equivalence is:
90 59 31
1000.00 1 + 0.06 = x 1 + 0.06 + x 1 + 0.06 +x
365 365 365

1014.79 = x(1.00969863) + x(1.00509589) + x

1014.79 = 3.01479452x
336.60 = x
The size of the equal payments is $336.60.
9) Let the size of the equal payments be $x.
The focal date is one year from now.
The maturity value of $1175 due in 9 months with 6% interest
9
= 1175 1 + 0.06 = 1227.88
12
The equation of equivalence is:
3 5
1430(1 + 0.075 2) + 1227.88 1 + 0.075 = x(1 + 0.075 1) + x 1 + 0.075 +x
12 12
1644.50 + 1250.90 = x(1.075) + x(1.03125) + x
2895.40 = 3.10625x
932.12 = x
The size of the equal payments is $932.12.
10) Let the size of the equal payments be $x.
The focal date is today.

5100.00 5100.00 5100.00 x x

+ + =x+ +
5 10 14 7 11
1 + 0.0875 1 + 0.0875 1 + 0.0875 1 + 0.0875 1 + 0.0875
12 12 12 12 12
x x
4920.60 + 4753.40 + 4627.60 = +
1 + 0.510417 1 + 0.0802083
14301.60 = x + .951437x + .9257474x
14301.60 = 2.8771844x
4970.69 = x
The size of the equal payments is $4970.69.

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Answer Key
Testname: UNTITLED1

11) Let the size of the equal payments be $x.

The focal date is today.
x
7120 = x +
1 + 0.0873 3
x
7120 = x +
1.2619
7120 = x + .7924558x
7120 = 1.7924558x
x = 3972.20
The size of the equal payments is $3972.20.