Question 1

Catherine borrowed $19,000 on June 20, at 10% interest. If the loan was due on September 17, what was the amount of interest on the loan using the exact interest method? (Round to the nearest cent)

Accepted Answer

The exact interest method calculates interest using the actual number of days in a year, which is 365. The loan duration from June 20 to September 17 is 89 days (10 days in June, 31 days in July, 31 days in August, and 17 days in September). The interest calculation formula is: Interest = Principal × Rate × Time, where Time = number of days/365. Therefore, the interest is: $19,000 × 10% × (89/365) = $463.29, rounded to the nearest cent.

Question 2

Jami's Home Repair borrows $3,000, at 12.75% interest, for 330 days. Use the exact interest method to find the amount of interest that the bank will collect. (Round to the nearest cent)

Accepted Answer

The exact interest method calculates interest using a 365-day year. The formula for exact interest is: Interest = Principal × Rate × Time, where Time is in years. For this problem, Interest = $3,000 × 12.75% × (330/365) = $3,000 × 0.1275 × 0.9041 = $345.82 (rounded to the nearest cent).

Question 3

A loan has a due date of September 4. If it is made on June 9, for how many days is the loan?

Accepted Answer

The answer of A loan has a due date of...

Question 4

Devon takes out a loan of $1,500, at $6 \frac { 1 } { 2 } \%$ simple interest, for 56 months. What is the maturity value of the loan? (Round to the nearest cent)

Accepted Answer

The maturity value of the loan is calculated using the formula for simple interest: $I = P \times r \times t$, where $I$ is the interest, $P$ is the principal amount ($1,500), $r$ is the annual interest rate (6.5% or 0.065 as a decimal), and $t$ is the time in years. For 56 months, $t = \frac{56}{12}$ years. So, $I = 1500 \times 0.065 \times \frac{56}{12}$. The interest $I = 455$. The maturity value is $P + I = 1500 + 455 = 1955$.

Question 5

What is the maturity date of a loan taken out on June 18, for 54 days?

Accepted Answer

The answer of What is the maturity date of a...

Question 6

What is the maturity date of a loan taken out on June 6, for 73 days?

Accepted Answer

The maturity date is calculated by adding the loan period to the start date. Starting from June 6 and adding 73 days lands on August 18, considering both June and July have a combination of 61 days (30 days in June and 31 days in July), leaving 12 days to be added to August, reaching August 18.

Question 7

A loan has a due date of November 20. If it is made on August 21, for how many days is the loan?

Accepted Answer

The loan spans from August 21 to November 20. Counting the days: August has 31 days, so from August 21 to August 31 is 11 days. September has 30 days, October has 31 days, and then 20 days in November until the due date. Adding these together: 11 (August) + 30 (September) + 31 (October) + 20 (November) = 92 days. However, since the start day is included, we subtract one day to avoid double counting, resulting in 91 days.

Question 8

State Bank made a loan at 12% interest for 360 days. If the amount of interest was $934.20, use the ordinary interest method to find the amount of principal borrowed. (Round to the nearest whole dollar)

Accepted Answer

Using the ordinary interest method, Interest = Principal x Rate x Time. Rearranging gives Principal = Interest / (Rate x Time). Here, Time is 360/360 = 1 year, Rate is 12% or 0.12, and Interest is $934.20. So, Principal = $934.20 / (0.12 x 1) = $7,785.

Question 9

Legitimate Financial Services made a loan at 9.75% interest for 254 days. If the amount of interest was $270.50, use the exact interest method to find the amount of principal borrowed. (Round to the nearest whole dollar amount)

Accepted Answer

The answer of Legitimate Financial Services made a loan at...

Question 10

What is the maturity date of a loan taken out on August 9, for 101 days?

Accepted Answer

To find the maturity date of a loan taken out on August 9 for 101 days, count the days starting from August 9. August has 22 days remaining (31-9), September has 30 days, October has 31 days, which totals 83 days. Subtracting 83 from 101 leaves 18 days in November, making the maturity date November 18.

Question 11

Find the maturity value on a loan of $2,500 at 10.5% interest, for 60 months. Use the formula MV = P + I.

Accepted Answer

The maturity value (MV) is calculated by adding the principal (P) to the interest (I). The interest can be calculated as I = PRT, where P is the principal ($2,500), R is the annual interest rate (10.5% or 0.105), and T is the time in years (60 months or 5 years). So, I = $2,500 * 0.105 * 5 = $1,312.50. Adding this to the principal gives MV = $2,500 + $1,312.50 = $3,812.50.

Question 12

On May 11, Corlis took out a loan for $2,900, at 8% ordinary interest, for 82 days. What is the maturity date of the loan?

Accepted Answer

The answer of On May 11, Corlis took out a...

Question 13

Using the ordinary interest method, find the amount of interest on a loan of $5,000 at $11 \frac { 1 } { 2 } \%$ interest, for 284 days.

Accepted Answer

The answer of Using the ordinary interest method, find the...

Question 14

Julius takes out a loan of $9,500, at 9.5% simple interest, for 4 months. What is the maturity value of the loan? (Round to the nearest cent)

Accepted Answer

The answer of Julius takes out a loan of $9,500,...

Question 15

Find the amount of interest on a loan of $10,500, at 9% interest, for 124 days using the exact interest method.

Accepted Answer

The exact interest method calculates interest using a base of 365 days. The formula is: Interest = Principal × Rate × Time / 365. So, Interest = $10,500 × 9% × 124 / 365 = $321.04.

Question 16

Slingerland borrowed $8,000 on July 20, at 11% interest. If the loan was due on October 17, what was the amount of interest on the loan using the exact interest method?

Accepted Answer

The answer of Slingerland borrowed $8,000 on July 20, at...

Question 17

Suppose that you took out a loan at 10% interest for 278 days. If the amount of interest was $761.64, use the exact interest method to find the amount of principal you borrowed. (Round to the nearest whole dollar)

Accepted Answer

The exact interest method calculates interest based on a 365-day year. The formula to find the principal (P) is P = I / (r * t), where I is the interest ($761.64), r is the annual interest rate (10% or 0.10), and t is the time in years (278/365). Plugging in the values: P = 761.64 / (0.10 * (278/365)) = $10,000 (rounded to the nearest whole dollar).

Question 18

A loan has a due date of December 20. If it is made on September 19, for how many days is the loan?

Accepted Answer

The loan is from September 19 to December 20. September has 30 days, so from September 19 to September 30 is 12 days. October has 31 days, November has 30 days, and from December 1 to December 20 is 20 days. Adding these gives 12 + 31 + 30 + 20 = 93 days. However, the correct calculation should be 30 (September 19 to October 19) + 31 (October 19 to November 19) + 30 (November 19 to December 19) + 1 (December 20) = 92 days.

Question 19

Tony's Towing borrows $12,250, at 9.5% interest, for 320 days. If the bank uses the exact interest method, how much interest will the bank collect? (Round to the nearest cent)

Accepted Answer

The exact interest method uses the formula: Interest = Principal x Rate x Time/365. Plugging in the values: Interest = $12,250 x 0.095 x 320/365 = $1,020.27.

Question 20

A loan has a due date of January 15. If it was made on October 3, of the previous year, for how many days is the loan?

Accepted Answer

From October 3 to January 15, the days in each month are counted as follows: October has 31 days, so from October 3 to October 31 is 29 days. November has 30 days. December has 31 days. January has 15 days (up to January 15). Adding these together: 29 (October) + 30 (November) + 31 (December) + 15 (January) = 105 days. However, since the question specifies the loan was made "on" October 3 and due "on" January 15, we count both these days in the total, which correctly totals to 105 days, indicating a mistake in the provided options. Given the options, the closest incorrect choice is 104 days, but the correct calculation actually results in 105 days.

Quiz 10: Simple Interest and Promissory Notes