Exam 7: Applications of Simple Interest

At the end of September Andy had $9,000 in his daily interest savings account. On the 12^th of October he withdrew $4,000. He made no other withdrawals or deposits in October. The simple interest rate throughout October was 4.2%. How much interest did Andy earn on this savings account in October?

What is the price of a $50,000, 182-day T-bill on its issue date if the market rate of return on this date was 6.875% simple interest?

Calculate and compare the market values of a $100,000 face value Government of Canada Treasury bill on dates that are 91 days, 61 days, 31 days, and one day before maturity. Assume that the rate of return required in the market stays constant at 3% simple interest over the lifetime of the T-bill.

A 90-day non-interest-bearing promissory note issued on September 30, 2015 for $5,000 was discounted at 5.75% simple interest on November 5, 2015. What were the proceeds of the note?

On a $10,000 principal investment, a bank offered simple interest rates of 1.45% on 270- to 364-day GIC's and 1.15% on 180- to 269-day GICs. How much more will an investor earn from a 364-day GIC than from two consecutive 182-day GICs? (Assume that the interest rate on 180- to 269-day GICs will be the same on the renewal date as it is today. Remember that both the principal and the interest from the first 182-day GIC can be invested in the second 182-day GIC.)

Calculate missing value for the promissory note:

On February 22, Jonathan had $20,000 of student loans. He agreed to a payment plan of $225 per month at an annual simple interest rate of 8.40%. Determine how much of the $225 will go towards the principal at the end of March.

Sixty-day commercial paper with face value $100,000 was issued by a company for $98,890.25. What simple interest rate of return will be realized if the investment is held until maturity?

What will be the maturity value of $10,000 placed in a 90-day term deposit paying a simple interest rate of 3.25%?

A 182-day, $250,000 Treasury Bill originally issued at 6.6% was sold at 5.9% simple interest, 82 days after it was issued. What was the selling price?

Sam borrowed $10,000 at prime + 2% on March 29. He agreed to payments of $2,000 on the first day of each month beginning May 1. The prime rate was 4% when Sam took out the loan. Construct a full repayment schedule showing details of the allocation of each payment to interest and principal. What is the final payment?

A six-month non-interest-bearing promissory note issued on April 11, 2015, for $4,000 was discounted at 6.25% simple interest on September 2, 2015. What were the proceeds of the note?

A 100-day $750 promissory note with interest at 12.5% simple interest was written on July 15. The maker approaches the payee on August 10 to propose an early settlement. What amount should the payee be willing to accept on August 10 if short-term investments can earn 8.25%?

Calculate the price of a $25,000, 91-day Province of British Columbia Treasury bill on its issue date if the current market rate of return is 3.672% simple interest.

A $100,000, 90-day commercial paper certificate issued by Wells Fargo Financial Canada was sold on its issue date for $99,250. What simple interest rate of return will it yield to the buyer?

A 168-day, $100,000 T-bill was initially issued at a price that would yield the buyer 4.19% simple interest. If the yield required by the market remains at 4.19%, how many days before its maturity date will the T-bill's market price first exceed $99,000?

Calculate the maturity value of a $1,000 face value, 5-month promissory note dated December 31, 2015, and bearing interest at 9.5% simple interest.

On October 15, Jerome had $9,000 of student loans. He agreed to a payment plan of $150 per month at an annual rate of 9.60% simple interest. Determine how much of the $150 will go towards the principal at the end of December.

What simple interest rate was used to discount 270-day, $750,000 commercial paper when it was issued for $710,000?

Certificate A pays $1,200 in six months and $1,100 in one year. Certificate B pays $1,150 in three months and $1,150 in one year. If the current rate of return required is 6.75% simple interest, which option pays the most interest and by how much?