QUESTION: 161

Mr. Rusty owes the bank $1,040,000, he returns $40,000 quarterly to the bank. If the tax on the money Rusty owes is compounded quarterly by 0.25% starting before Rusty paid the first payment, how months would it take poor Rusty to reach a point where he owes the bank no more than 1 million dollars?

Answer(s): B

Explanation:

Every three months Rusty gives the bank $40,000.
After the first quarter the bank took (0.0025 x 1040000 = 2600) and Rusty paid $40,000 so the new Debt is now (1,040,000 - 40,000 + 2,600 = 1,002,600).
After the second quarter the bank took (0.0025 x 1002600 = 2506.5) and Rusty paid again $40,000 so the new Debt is now (1,002,600 – 40,000 + 2506.5 < 1 million dollars).

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QUESTION: 162

Simba borrowed $12,000 from his brothers so he can buy a new sports car. If Simba returns 4.5% of that amount every 2 weeks, after how many months Simba wouldn’t owe his brothers any more money?

Answer(s): B

Explanation:

Simba gives (0.045 x 12,000 = 540) to his brothers every 2 weeks, in a month he gives (540 x 2 = 1080). (12,000/1,080 is a little over 11), therefore after 12 months he won’t owe any more money.

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