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IB Maths AI HL 1.7 Amortization, annuities and repayment models Question Bank

Practise IB Maths AI HL 1.7 by analysing amortization schedules, annuity equations and repayment decisions.

Syllabus
First assessment 2021
Course
Mathematics: applications and interpretation HL
Level
HL

Exam points

  • Construct or solve an annuity equation for regular payments, interest and outstanding balance.
  • Analyse how a final repayment or changed timing affects total interest and savings.
  • Evaluate a financial model by checking compounding period, payment timing and numerical precision.

SL 1.7—Amortization and annuities question 1

[Maximum number: 12]

Give your answers in parts (a), (d)(i), (e) and (f) to the nearest dollar.
Daisy invested 37000 Australian dollars (AUD) in a fixed deposit account with an annual interest rate of 6.4 % compounded quarterly.

Question (a)

(a)

Write down the amount of the loan.

The loan is for 10 years, compounded monthly, with equal monthly payments of 1700 AUD made by Daisy at the end of each month.

[ 1 ]

Question (b)

(b)

For this loan, find

[ 5 ]

Question (i)

(i)

the amount of interest paid by Daisy.

[ 2 ]

Question (ii)

(ii)

the annual interest rate of the loan.

After 5 years of paying off this loan, Daisy decides to pay the remainder in one final payment.

[ 3 ]

Question (c)

(c)

Find the amount of Daisy's final payment.

[ 3 ]

Question (d)

(d)

Find how much money Daisy saved by making one final payment after 5 years.

[ 3 ]
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