Question 1

On June 26 Laura put $2,750 into a term deposit until September 3, when she needs the money for tuition, books, and other expenses to return to college. For term deposits in the 60-89-day range, her credit union pays an interest rate of 4.25%. How much interest will she earn on the term deposit?

Accepted Answer

The answer of On June 26 Laura put $2,750 into...

Question 2

Raimo borrowed $750 from Chris on October 30 and agreed to repay the debt with simple interest at the rate of 4.3% on May 10. How much interest was owed on May 10? Assume that February has 28 days.

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The answer of Raimo borrowed $750 from Chris on October...

Question 3

Calculate the missing value:

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The answer of Calculate the missing value:
 ...

Question 4

What single payment one year from now will satisfy two obligations: $4,000 due today and $6,000 due 18 months from now? Assume that money can earn 14%.
A) $5,083.74
B) $5,000.00
C) $10,980.00
D) $10,167.48
E) $5,490.00

Accepted Answer

To find the single payment one year from now, calculate the present value of the $6,000 due in 18 months and the future value of the $4,000 due today, both at 14% interest. Then sum these values to find the equivalent single payment.

Question 5

A payment of $590 is now 93 days overdue. A second payment of $955 will be due and payable in 200 days. If money can earn an interest rate of 11%, what single amount, paid in 30 days, will be an equivalent replacement payment?
A) $1,507
B) $1,520
C) $1,545
D) $1,629
E) $1,783

Accepted Answer

The answer of A payment of $590 is now 93...

Question 6

An invoice states that interest will be charged on overdue accounts at the rate of 1½% per month. What will be the interest charges on a $3,760 billing that is 3 months overdue?

Accepted Answer

The answer of An invoice states that interest will be...

Question 7

A contract was signed eight months ago requiring the payment of $13,000 plus interest at 8% after one year. What two equal payments made today and four months from today are equivalent to the original contract? Assume that money is now worth 5%. Use four months from today as the focal date.
A) $7,020.00
B) $7,070.11
C) $6,446.28
D) $13,809.84
E) $7,078.02

Accepted Answer

The future value of the contract is $13,000 * (1 + 0.08) = $14,040. The present value of this amount four months from today at 5% is $14,040 / (1 + 0.05 * (4/12)) = $13,809.84. The two equal payments, one today and one four months from today, should have a present value of $13,809.84. Solving for the equal payments using the formula for the present value of an annuity, we find that each payment is approximately $7,070.11.

Question 8

A $3,000 obligation due eight months from now is settled by two equal payments, one five months from now and the other nine months from now. If money can earn interest at 16%, what is the size of each payment? Use a focal date five months from now.
A) $3,038.46
B) $1,723.64
C) $861.82
D) $1,479.77
E) $2,959.54

Accepted Answer

To find the size of each payment, we need to calculate the present value of the $3,000 obligation at the focal date (five months from now) and then determine the equal payments. The present value of the $3,000 due in eight months is $3,000 / (1 + 0.16 * (3/12)) = $2,959.54. The present value of the second payment (due in nine months) at the focal date is X / (1 + 0.16 * (4/12)). The first payment is X. Solving the equation X + X / (1 + 0.16 * (4/12)) = $2,959.54 gives X = $1,479.77.

Question 9

Maia's chequing account was $329 overdrawn beginning on September 24. On October 9 she made a deposit that restored a credit balance. If she was charged overdraft interest of $2.50, what annual rate of simple interest was charged?

Accepted Answer

The answer of Maia's chequing account was $329 overdrawn beginning...

Question 10

On June 26, 2013, $1000 was borrowed at an interest rate of 10.75%. On what date was the loan repaid if the amount of accrued interest was $63.91?

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The answer of On June 26, 2013, $1000 was borrowed...

Question 11

Joyce had $2,149 in her daily interest savings account for the entire month of June. Her account was credited with interest of $2.65 on June 30 (for the exact number of days in June). What annual rate of simple interest did her balance earn?

Accepted Answer

The answer of Joyce had $2,149 in her daily interest...

Question 12

Calculate the missing value:

Accepted Answer

The answer of Calculate the missing value:
...

Question 13

How much interest will be earned on $5,000 in 5 months if the annual simple interest rate is 1.5%?

Accepted Answer

The answer of How much interest will be earned on...

Question 14

Calculate the missing value:

Accepted Answer

The answer of Calculate the missing value:
 ...

Question 15

The interest owed on a loan after 5 months was $292.50. If the simple interest rate charged on the loan was 0.9% per month, what was the amount borrowed?

Accepted Answer

The answer of The interest owed on a loan after...

Question 16

A five-month term deposit of $10,000 at the Scotiabank earned $75 in interest. What annual rate of simple interest did the deposit earn?

Accepted Answer

The answer of A five-month term deposit of $10,000 at...

Question 17

Frankie's Furniture Mart has contracts from one customer who will pay $4,695 in 5 months and another customer who will pay $7,830 in 7 months. Frankie can sell the contracts today to Vinnie's finance company at a discount rate of 23.5%. How much money will Vinnie pay to Frankie today for the two contracts?
A) $11,162
B) $11,208
C) $12,525
D) $13,705
E) $14,058

Accepted Answer

The correct answer is A.The present value of the first contract is $4,695 / (1 + 0.235)^5 = $3,000. The present value of the second contract is $7,830 / (1 + 0.235)^7 = $4,200. The total present value of the two contracts is $3,000 + $4,200 = $7,200. Vinnie will pay Frankie $7,200 for the two contracts today.

Question 18

Calculate the missing value:

Accepted Answer

The answer of Calculate the missing value:
 ...

Question 19

How much must be placed in a 5-month term deposit earning 4.3%, simple interest, in order to earn $500 interest?

Accepted Answer

The answer of How much must be placed in a...

Question 20

Calculate the missing value:

Accepted Answer

The answer of Calculate the missing value:
...

Quiz 6: Simple Interest

On June 26 Laura put $2,750 into a term deposit until September 3, when she needs the money for tuition, books, and other expenses to return to college. For term deposits in the 60-89-day range, her credit union pays an interest rate of 4.25%. How much interest will she earn on the term deposit?

Raimo borrowed $750 from Chris on October 30 and agreed to repay the debt with simple interest at the rate of 4.3% on May 10. How much interest was owed on May 10? Assume that February has 28 days.

Calculate the missing value:

What single payment one year from now will satisfy two obligations: $4,000 due today and $6,000 due 18 months from now? Assume that money can earn 14%.

A payment of $590 is now 93 days overdue. A second payment of $955 will be due and payable in 200 days. If money can earn an interest rate of 11%, what single amount, paid in 30 days, will be an equivalent replacement payment?

An invoice states that interest will be charged on overdue accounts at the rate of 1½% per month. What will be the interest charges on a $3,760 billing that is 3 months overdue?

A contract was signed eight months ago requiring the payment of $13,000 plus interest at 8% after one year. What two equal payments made today and four months from today are equivalent to the original contract? Assume that money is now worth 5%. Use four months from today as the focal date.

A $3,000 obligation due eight months from now is settled by two equal payments, one five months from now and the other nine months from now. If money can earn interest at 16%, what is the size of each payment? Use a focal date five months from now.

Maia's chequing account was $329 overdrawn beginning on September 24. On October 9 she made a deposit that restored a credit balance. If she was charged overdraft interest of $2.50, what annual rate of simple interest was charged?

On June 26, 2013, $1000 was borrowed at an interest rate of 10.75%. On what date was the loan repaid if the amount of accrued interest was $63.91?

Joyce had $2,149 in her daily interest savings account for the entire month of June. Her account was credited with interest of $2.65 on June 30 (for the exact number of days in June). What annual rate of simple interest did her balance earn?

Calculate the missing value:

How much interest will be earned on $5,000 in 5 months if the annual simple interest rate is 1.5%?

Calculate the missing value:

The interest owed on a loan after 5 months was $292.50. If the simple interest rate charged on the loan was 0.9% per month, what was the amount borrowed?

A five-month term deposit of $10,000 at the Scotiabank earned $75 in interest. What annual rate of simple interest did the deposit earn?

Calculate the missing value:

How much must be placed in a 5-month term deposit earning 4.3%, simple interest, in order to earn $500 interest?

Calculate the missing value: