Exam 10: Simple Interest

Joan Roe borrowed $85,000 at a rate of 11 3/4%. The date of the loan was July 8. Joan is to repay the loan on Sept. 14. Assuming the loan is based on exact interest, the interest Joan will pay on Sept. 14 is:

Janet Home went to Citizen Bank. She borrowed $7,000 at a rate of 8%. The date of the loan was September 20. Janet hoped to repay the loan on January 20. Assuming the loan is based on ordinary interest, Janet will pay back how much interest on January 20?

The amount charged for the use of a bank's money is called:

On May 17, Jane took out a loan for $33,000 at 6% to open her law practice office. The loan will mature the following year on January 16. Using the ordinary interest method, what is the maturity value due on January 16?

Rate is equal to interest divided by the principal times time.

Ordinary interest is required by all banks.

Solve:

The number of days between May 20 and November 22 is:

Sandra Gloy borrowed $5,000 on a 120-day 5% note. Sandra paid $500 toward the note on day 40. On day 90 she paid an additional $500. Using the U.S. Rule, her adjusted balance after the first payment is:

Simple interest usually represents a loan of:

Bruce Seem took out the same loan as Alice in the preceding problem, but his terms were exact interest. What is the difference in interest cost and what will Bruce pay back on January 14, 2016?

The U.S. Rule is seldom used in today's workplace.

Ordinary interest results in a slightly higher rate of interest than exact interest.

The U.S. Rule is a method that allows the borrower to receive proper interest credit when a debt is paid off in more than one payment before the maturity date.

Solve:

Interest of $1,632 with principal of $16,000 for 306 days (ordinary interest) results in a rate of:

Alice took out a loan for $19,500 at 13 1/2% on March 4, 2015 which will be due on January 14, 2016. Using ordinary interest, what will be the interest cost and what amount will Alice pay back on January 14, 2016?

Sue Gastineau borrowed $17,000 from Regions Bank at a rate of 5.5% to open her lingerie shop. The date of the loan was March 5. Sue hoped to repay the loan on September 19. Assuming the loan is based on ordinary interest, Sue will pay back how much in interest expense?

Jim Murphy borrowed $30,000 on a 120-day 14% note. Jim paid $5,000 toward the note on day 95. On day 105 he paid an additional $6,000. Using the U.S. Rule, Jim's adjusted balance after the first payment is:

Joe Flynn visits his local bank to see how long it will take for $1,200 to amount to $2,100 at a simple interest rate of 7%. The time is (round time in years to nearest tenth):