barney fletcher math loans Questions with CORRECT
Answers (Grade A+)
Question 1:
Bob and Carol are buying a home for $180,000 and putting up a down payment of 20%. They have to
pay 2 discount points. What will be the amount paid for the discount points? Select one: a. $3,600. b.
$3,250. c. $3,000. d. $2,880.
Answer:
$180,000 price X 20% = $36,000 down payment. $180,000 less $36,000 down payment = $144,000
loan amount. $144,000 X .02 = $2,880 in discount points. The correct answer is: $2,880.
Question 2:
What is the current balance of a 7.5% loan if this month's interest charge is $786.97?t
Answer:
$786.97 X 12 = $9,443.64 annualized interest. $9,443.64 divided by .075 = $125,915 (rounded). The
correct answer is: $125,915.
Question 3:
Use the amortization table to solve this problem. We recommend writing this one out manually to get a
better visual. A new row begins after each vertical bar (|), and a comma separates each cell. Per $1,000
of loan amount: |Rate, 15 Years, 20 Years, 25 Years, 30 Years |9%, 10.15, 9.00, 8.40, 8.05 |9.5%,
10.45, 9.33, 8.74, 8.41 |10%, 10.75, 9.66, 9.09, 8.78|. A couple can qualify for a monthly loan payment
of $1,200 (P&I). In addition to closing costs, they will make a $10,000 down payment. If lenders are
offering 20-year loans at 9.5%, what
Answer:
Using the table, 20-year loans at 9.5% require $9.33 per $1,000. $1,200 (monthly) / $9.33 x $1,000 =
$128,617 loan amount. $128,617 loan + $10,000 down = $138,617 purchase price, which would be
rounded down to $138,600. The correct answer is: $138,600 is the maximum amount that they can
spend on a house? (To the nearest $100)
, Question 4:
If a homebuyer took out a 30-year $150,000 fixed rate loan and the monthly principal and interest
payment was $760.03. If the first monthly payment reduces the principal balance by $197.80, what is
the interest rate of the loan? Select
Answer:
If the first payment reduced the principal balance by $197.80, the first month's interest payment must
have been $562.50, which is the $760.03 less the $197.80 principal payment. First multiply the
monthly interest payment times 12 to get the annualized payment: $562.50 X 12 = $6,750. Now divide
the annualized interest by the loan amount to determine the interest rate. $6,750 divided by $150,000 =
.045 = 4.5%. The correct answer is: 4.5%.
Question 5:
A homebuyer took out a $350,000 30-year fixed rate loan at 4.5% interest with a monthly payment of
$1,773.40. After making two monthly payments the principal balance of the loan will have been
reduced by a total of:
Answer:
First month's payment: $350,000 X .045 = $15,750 annualized interest. $15,750 divided by 12 =
$1,312.50 first month's interest. $1,773.40 less $1,312.50 interest = $460.90 first month's principal
reduction. $350,000 less $460.90 = $349,539.10 remaining balance. Second month's payment:
$349,539.10 X .045 = $15,729.30 annualized interest. $15,729.30 divided by 12 = $1,310.77 second
month's interest. $1,773.40 less $1,310.77 = $462.63 second months principal reduction. $460.90 +
$462.63 = $923.63 total principal reduction after 2 payments. The correct answer is: $923.53.
Question 6:
Use the amortization table to solve this problem. We recommend writing this one out manually to get a
better visual. A new row begins after each vertical bar (|), and a com-
Answer:
The amortization table indicates a monthly payment of $8.40 per $1,000. $110,000 x $8.40 = $924 per
month. $924 x 300 (25 years at 12 payments per year) = $277,200. $277,200 is the total you would pay,
but $110,000 of it is for principal. $277,200 - $110,000 = ma separates each cell. Per $1,000 $167,200
total interest paid. of loan amount: |Rate, 15 Years, The correct answer is: $167,200 20 Years, 25
Years, 30 Years |9%, 10.15, 9.00, 8.40, 8.05 |9.5%, 10.45, 9.33, 8.74, 8.41 |10%, 10.75, 9.66, 9.09,
8.78|. Assume you borrow $110,000 at 9% for 25 years. How much interest will be paid if the loan is
paid off at the scheduled maturity date?
Answers (Grade A+)
Question 1:
Bob and Carol are buying a home for $180,000 and putting up a down payment of 20%. They have to
pay 2 discount points. What will be the amount paid for the discount points? Select one: a. $3,600. b.
$3,250. c. $3,000. d. $2,880.
Answer:
$180,000 price X 20% = $36,000 down payment. $180,000 less $36,000 down payment = $144,000
loan amount. $144,000 X .02 = $2,880 in discount points. The correct answer is: $2,880.
Question 2:
What is the current balance of a 7.5% loan if this month's interest charge is $786.97?t
Answer:
$786.97 X 12 = $9,443.64 annualized interest. $9,443.64 divided by .075 = $125,915 (rounded). The
correct answer is: $125,915.
Question 3:
Use the amortization table to solve this problem. We recommend writing this one out manually to get a
better visual. A new row begins after each vertical bar (|), and a comma separates each cell. Per $1,000
of loan amount: |Rate, 15 Years, 20 Years, 25 Years, 30 Years |9%, 10.15, 9.00, 8.40, 8.05 |9.5%,
10.45, 9.33, 8.74, 8.41 |10%, 10.75, 9.66, 9.09, 8.78|. A couple can qualify for a monthly loan payment
of $1,200 (P&I). In addition to closing costs, they will make a $10,000 down payment. If lenders are
offering 20-year loans at 9.5%, what
Answer:
Using the table, 20-year loans at 9.5% require $9.33 per $1,000. $1,200 (monthly) / $9.33 x $1,000 =
$128,617 loan amount. $128,617 loan + $10,000 down = $138,617 purchase price, which would be
rounded down to $138,600. The correct answer is: $138,600 is the maximum amount that they can
spend on a house? (To the nearest $100)
, Question 4:
If a homebuyer took out a 30-year $150,000 fixed rate loan and the monthly principal and interest
payment was $760.03. If the first monthly payment reduces the principal balance by $197.80, what is
the interest rate of the loan? Select
Answer:
If the first payment reduced the principal balance by $197.80, the first month's interest payment must
have been $562.50, which is the $760.03 less the $197.80 principal payment. First multiply the
monthly interest payment times 12 to get the annualized payment: $562.50 X 12 = $6,750. Now divide
the annualized interest by the loan amount to determine the interest rate. $6,750 divided by $150,000 =
.045 = 4.5%. The correct answer is: 4.5%.
Question 5:
A homebuyer took out a $350,000 30-year fixed rate loan at 4.5% interest with a monthly payment of
$1,773.40. After making two monthly payments the principal balance of the loan will have been
reduced by a total of:
Answer:
First month's payment: $350,000 X .045 = $15,750 annualized interest. $15,750 divided by 12 =
$1,312.50 first month's interest. $1,773.40 less $1,312.50 interest = $460.90 first month's principal
reduction. $350,000 less $460.90 = $349,539.10 remaining balance. Second month's payment:
$349,539.10 X .045 = $15,729.30 annualized interest. $15,729.30 divided by 12 = $1,310.77 second
month's interest. $1,773.40 less $1,310.77 = $462.63 second months principal reduction. $460.90 +
$462.63 = $923.63 total principal reduction after 2 payments. The correct answer is: $923.53.
Question 6:
Use the amortization table to solve this problem. We recommend writing this one out manually to get a
better visual. A new row begins after each vertical bar (|), and a com-
Answer:
The amortization table indicates a monthly payment of $8.40 per $1,000. $110,000 x $8.40 = $924 per
month. $924 x 300 (25 years at 12 payments per year) = $277,200. $277,200 is the total you would pay,
but $110,000 of it is for principal. $277,200 - $110,000 = ma separates each cell. Per $1,000 $167,200
total interest paid. of loan amount: |Rate, 15 Years, The correct answer is: $167,200 20 Years, 25
Years, 30 Years |9%, 10.15, 9.00, 8.40, 8.05 |9.5%, 10.45, 9.33, 8.74, 8.41 |10%, 10.75, 9.66, 9.09,
8.78|. Assume you borrow $110,000 at 9% for 25 years. How much interest will be paid if the loan is
paid off at the scheduled maturity date?
