Question 1

Which of the following two payment streams has the greater economic value today if money can earn 3.5%: $500 now, $600 in three months, plus $900 in six months or $700 now, $300 in three months, plus $1,000 in nine months?

Accepted Answer

The answer of Which of the following two payment streams...

Question 2

Ninety days ago Stella signed an agreement with Manon requiring her to make three payments of $400 plus interest 90, 150, and 210 days, respectively, from the date of the agreement. Each payment was to include interest on the $400 principal at the rate of 13.5% from the date of the agreement. Stella now wants Ed to renegotiate the agreement and accept a single payment 30 days from now, instead of the three scheduled payments. What payment should Manon require in the new agreement if money is worth 8.5%?

Accepted Answer

The answer of Ninety days ago Stella signed an agreement...

Question 3

A $5,000 loan made on March 15 at an interest rate of 7.5%, is to be repaid by payments of $2,000 on June 15, $2,000 on October 15, and a final payment on December 15. What is the amount of the final payment required to pay off the loan in full?

Accepted Answer

The answer of A $5,000 loan made on March 15...

Question 4

A $10,000 loan made on January 1 at 7%, is to be repaid by payments of $3,500 on July 1, $3,500 on October 1, and a final payment on January 1 of the next year. What is the amount of the final payment required to pay off the loan in full?

Accepted Answer

The answer of A $10,000 loan made on January 1...

Question 5

Maurice borrowed $6,000 from Heidi on April 23 and agreed to make payments of $2,000 on June 1 and $2,000 on August 1, and to pay the balance on October 1. If simple interest at the rate of 10% was charged on the loan, what is the amount of the third payment?

Accepted Answer

The answer of Maurice borrowed $6,000 from Heidi on April...

Question 6

A loan of $4,000 at 13% is to be repaid by three equal payments due four, six, and eight months after the date on which the money was advanced. Calculate the amount of each payment.

Accepted Answer

The answer of A loan of $4,000 at 13% is...

Question 7

A loan of $10,000 is to be repaid by three payments of $2,500 due in two, four, and six months, and a fourth payment due in eight months. What should be the size of the fourth payment if an interest rate of 11% is charged on the loan? Use today as the focal date.

Accepted Answer

The answer of A loan of $10,000 is to be...

Question 8

A karate club offers two payment plans for a one-year membership. The first is a cash price of $475. The second is a payment of $250 today, and $250 in six months. If the interest rate charged by the club is 8%, which option has the greater economic value?

Accepted Answer

The answer of A karate club offers two payment plans...

Question 9

A $6,000 loan at 8% is to be repaid in three equal payments at three months, six months, and nine months. Determine the size of the equal payments.

Accepted Answer

The answer of A $6,000 loan at 8% is to...

Question 10

$3,000 loan was advanced on March 1. The loan is to be repaid by the three indicated payments. Calculate the unknown payment in each case. Use the loan date as the focal date.

Accepted Answer

The answer of $3,000 loan was advanced on March 1....

Question 11

Kris has borrowed $2,000 and has agreed to repay the loan in two payments in nine and fifteen months. Each payment is $1,000 of principal and interest at the rate of 7%. Kris wants to settle the debt in six months. What single equivalent payment should she make if money is now worth 5%?

Accepted Answer

The answer of Kris has borrowed $2,000 and has agreed...

Question 12

In how many months will $6,000 earn interest of $2,700 at 15%?
A) 3 months
B) 36 months
C) 4 months
D) 60 months
E) 1 month

Accepted Answer

To find the number of months it takes for $6,000 to earn $2,700 in interest at a 15% annual rate, we use the formula for simple interest: I = PRT, where I is the interest earned, P is the principal amount, R is the annual interest rate (as a decimal), and T is the time in years. Rearranging the formula to solve for T gives us T = I / (PR).Given:- I = $2,700- P = $6,000- R = 15% per year = 0.15Plugging these values into the formula gives us T = $2,700 / ($6,000 * 0.15) = $2,700 / $900 = 3 years.Since the question asks for the number of months, we convert years to months by multiplying by 12: 3 years * 12 months/year = 36 months.

Question 13

Seth has a loan to repay. His terms are payments of $1,000 in six months and $1,000 in one year. He wants to settle the debt in three months. If the rate of interest is 6.5%, what single equivalent payment should Sam make?

Accepted Answer

The answer of Seth has a loan to repay. His...

Question 14

The original $3,000 loan was advanced on March 1. The loan is to be repaid by the three indicated payments. Calculate the unknown payment in each case. Use the loan date as the focal date.

Accepted Answer

The answer of The original $3,000 loan was advanced on...

Question 15

A $7,500 loan will be paid off by four equal payments to be made 2, 5, 9, and 12 months after the date of the loan. What is the amount of each payment if the interest rate on the loan is 9.9%?

Accepted Answer

The answer of A $7,500 loan will be paid off...

Question 16

How much must be placed in a two-month term deposit earning 4.8% in order to earn $275 interest?
A) $12,500.00
B) $5,729.17
C) $23,333.33
D) $34,375.00
E) $53,333.33

Accepted Answer

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

Question 17

An $8,000 loan at an interest rate of 6.5% is to be repaid in three equal payments at six months, nine months, and one year later. Determine the size of the equal payments.

Accepted Answer

The answer of An $8,000 loan at an interest rate...

Question 18

The original $3,000 loan was advanced on March 1. The loan is to be repaid by the three indicated payments. Calculate the unknown payment in each case. Use the loan date as the focal date.

Accepted Answer

The answer of The original $3,000 loan was advanced on...

Question 19

How much interest will be earned on $8,000 over a period of four months if the interest rate is 6.5%?
A) $7,830.34
B) $173.33
C) $169.66
D) $130.00
E) $26.00

Accepted Answer

To find the interest earned, we need to use the formula:

Interest = Principal x Rate x Time

Where:
Principal = $8,000
Rate = 6.5% or 0.065 (in decimal form)
Time = 4/12 or 0.33 (since 4 months is 1/3 of a year)

Plugging in the values, we get:

Interest = $8,000 x 0.065 x 0.33
Interest = $173.33

Therefore, the interest earned on $8,000 over a period of four months at an interest rate of 6.5% is $173.33. The best choice is B.

Question 20

Calculate the size of the equal payments. Use the loan date as the focal date.

Accepted Answer

The answer of Calculate the size of the equal payments....

Quiz 6: Simple Interest

Which of the following two payment streams has the greater economic value today if money can earn 3.5%: $500 now, $600 in three months, plus $900 in six months or $700 now, $300 in three months, plus $1,000 in nine months?

A $5,000 loan made on March 15 at an interest rate of 7.5%, is to be repaid by payments of $2,000 on June 15, $2,000 on October 15, and a final payment on December 15. What is the amount of the final payment required to pay off the loan in full?

A $10,000 loan made on January 1 at 7%, is to be repaid by payments of $3,500 on July 1, $3,500 on October 1, and a final payment on January 1 of the next year. What is the amount of the final payment required to pay off the loan in full?

Maurice borrowed $6,000 from Heidi on April 23 and agreed to make payments of $2,000 on June 1 and $2,000 on August 1, and to pay the balance on October 1. If simple interest at the rate of 10% was charged on the loan, what is the amount of the third payment?

A loan of $4,000 at 13% is to be repaid by three equal payments due four, six, and eight months after the date on which the money was advanced. Calculate the amount of each payment.

A loan of $10,000 is to be repaid by three payments of $2,500 due in two, four, and six months, and a fourth payment due in eight months. What should be the size of the fourth payment if an interest rate of 11% is charged on the loan? Use today as the focal date.

A karate club offers two payment plans for a one-year membership. The first is a cash price of $475. The second is a payment of $250 today, and $250 in six months. If the interest rate charged by the club is 8%, which option has the greater economic value?

A $6,000 loan at 8% is to be repaid in three equal payments at three months, six months, and nine months. Determine the size of the equal payments.

$3,000 loan was advanced on March 1. The loan is to be repaid by the three indicated payments. Calculate the unknown payment in each case. Use the loan date as the focal date.

Kris has borrowed $2,000 and has agreed to repay the loan in two payments in nine and fifteen months. Each payment is $1,000 of principal and interest at the rate of 7%. Kris wants to settle the debt in six months. What single equivalent payment should she make if money is now worth 5%?

In how many months will $6,000 earn interest of $2,700 at 15%?

Seth has a loan to repay. His terms are payments of $1,000 in six months and $1,000 in one year. He wants to settle the debt in three months. If the rate of interest is 6.5%, what single equivalent payment should Sam make?

The original $3,000 loan was advanced on March 1. The loan is to be repaid by the three indicated payments. Calculate the unknown payment in each case. Use the loan date as the focal date.

A $7,500 loan will be paid off by four equal payments to be made 2, 5, 9, and 12 months after the date of the loan. What is the amount of each payment if the interest rate on the loan is 9.9%?

How much must be placed in a two-month term deposit earning 4.8% in order to earn $275 interest?

An $8,000 loan at an interest rate of 6.5% is to be repaid in three equal payments at six months, nine months, and one year later. Determine the size of the equal payments.

The original $3,000 loan was advanced on March 1. The loan is to be repaid by the three indicated payments. Calculate the unknown payment in each case. Use the loan date as the focal date.

How much interest will be earned on $8,000 over a period of four months if the interest rate is 6.5%?

Calculate the size of the equal payments. Use the loan date as the focal date.