Drill 19 ·
AP Business with Personal Finance Personal Saving and Borrowing Drill 19 is a practice drill. It contains 5 original questions created by Brian Stewart, a Barron's test prep author with over 20 years of tutoring experience.
A personal-finance drill on saving toward a goal and comparing two simple-interest loan options; uses an invented household and original figures.
Dana Okafor is saving toward the down payment on a used car and comparing two ways to finance the rest of the purchase. The first table shows Dana's monthly savings plan. The second table compares two one-year simple-interest loans for the $4,000 balance that savings will not cover. The figures are hypothetical.
Figure 1. Dana's Down-Payment Savings Plan
| Item | Amount |
|---|---|
| Down-payment goal | $3,240 |
| Amount saved each month | $360 |
| Months saved so far | 5 |
| Amount saved so far | $1,800 |
Figure 2. Two One-Year Loan Options for the $4,000 Balance (simple interest)
| Item | Option A: Credit Union | Option B: Dealer |
|---|---|---|
| Annual interest rate | 8% | 12% |
| Interest for one year | $320 | $480 |
| Total repaid after one year | $4,320 | $4,480 |
Question 1. Q1: According to Figure 1, how much has Dana saved so far?
Explanation: Q1: Read directly from the figure. The savings-so-far line shows $1,800. $3,240 is the total goal, not the amount saved yet. $360 is the monthly amount, only one month. $1,440 is the amount still remaining, not the amount saved.
Question 2. Q2: Saving a fixed amount each month toward a specific future purchase is best described as which personal-finance practice?
Explanation: Q2: Setting aside a fixed sum each month for a named future purchase is goal-based saving. Borrowing on credit is taking on debt, the opposite of saving. Paying interest is a cost of borrowing, not a saving practice. Diversifying investments spreads money across assets and is not what a fixed monthly deposit toward one goal describes.
Question 3. Q3: At $360 per month, how many more months does Dana need to reach the $3,240 goal from the amount saved so far?
Explanation: Q3: The goal is $3,240 and $1,800 is saved, leaving $1,440. Dividing $1,440 by $360 per month gives 4 months. 9 months is the total time from zero, not the time remaining. 5 months is the time already elapsed. 3 months would leave Dana $360 short of the goal.
Question 4. Q4: Why does Option A (the credit union loan) cost Dana less over the year than Option B (the dealer loan)?
Explanation: Q4: Both loans are for the same $4,000 over one year, so the only difference is the rate: 8% produces $320 of interest while 12% produces $480, a $160 saving. The repayment period is one year for both, so length is not the reason. Neither option states a different down payment. The balance financed is $4,000 in both cases, so it is not a smaller balance.
Question 5. Q5: Dana has decided to borrow the $4,000 balance and wants to keep total borrowing cost as low as possible. Based on the figures, which choice best meets that need?
Explanation: Q5: Option A repays $4,320 against Option B's $4,480, so it is the lower-cost borrowing choice for the stated need. Option B costs $160 more, so convenience does not meet the cost goal. Delaying indefinitely is not supported by the figures and abandons the purchase rather than financing it. A larger monthly payment alone does not indicate lower total cost and can simply mean a shorter term at the higher rate.