Exam 7: Applications of Simple Interest

An investment earning 16% simple interest has a maturity value of $9,440.00 after eight months. What was the initial amount invested?

On July 1, David borrowed $9,500 from his revolving line of credit. At the time the annual simple interest rate was 3.80%. On September 15, the annual interest rate was lowered to 3.60%. Determine the interest paid from July 1^st to December 31^st.

At the end of April, Brad had $7,500 in his daily interest savings account. On the 13^th of May he deposited another $3,500. He made no other deposits or withdrawals in May. The simple interest rate throughout May was 3.7%. How much interest did Brad earn on this savings account in May?

Calculate missing value for the promissory note:

Calculate and compare the issue date prices of $100,000 face value commercial paper investments with 30, 60, and 90-day maturities, all priced to yield 5.5% simple interest.

A 7-month, $75,400 Guaranteed Investment Certificate pays simple interest of 6.85%. Calculate the maturity value.

Alice purchased a $100,000 180-day Acme Corporation Commercial Paper when it was first issued at a yield simple interest rate of 7.45%. 50 days later she sold it to Betty at a rate that would provide Betty with a return of 8.45% if Betty held it to maturity. What annual simple rate did Alice actually realize over the period that she held the Commercial Paper?

If the average rate of return on 168-day Government of Canada Treasury bills sold at the Tuesday auction was 2.35%, what price was paid for a $100,000 face value T- bill?

Jake purchased a $100,000 182-day T-bill discounted to yield 5.5%. When he sold it 30 days later, yields had dropped to 5.0% simple interest. How much did Jake earn? (Taken from CIFP course materials.)

A money market mutual fund purchased $1 million face value of Honda Canada Finance Inc. 90-day commercial paper 28 days after its issue. What price was paid if the paper was discounted at 2.10% simple interest?

On January 20, Samantha borrowed $17,000 from her revolving line of credit. The current annual simple interest rate at the time was 4.5%. On May 5, Samantha borrowed another $10,000. Due to an increase in borrowing, the annual interest rate increased to 4.75%. On August 12, Samantha repaid the total amount borrowed, along with interest. Determine the interest amount to be repaid.

The purchaser of a 168 day T-bill with a face value of $100,000 paid $97,320.00 for it. After 60 days, interest rates had increased and she sold the T-bill for $97,833.95. What simple interest rate of return per annum did she realize while holding the T-bill?

Lydia purchased a $100,000 150-day T-bill when the prevailing yield on T-bills was 4.5%. She sold the T-bill 60 days later when the prevailing yield was 4.2%. What simple interest rate did Lydia earn during the 60-day period? (Taken from CIFP course materials.)

On January 1, Natalie had $15,000 in student loans outstanding. She agreed to $90 per month payments to repay these loans. From January 1 to February 14, the simple interest rates were 7.0%, but increased to 7.5% thereafter. Calculate the amount of interest paid for the month of February.

A chartered bank offers a rate of 5.50% on investments of $25,000 to $59,999 and a simple interest rate of 5.75% on investments of $60,000 to $99,999 in 90 to 365-day GICs. How much more will an investor earn from a single $80,000, 180-day GIC than from two $40,000, 180-day GICs?

An assignable loan contract executed three months ago requires two payments to be paid five and ten months after the contract date. Each payment consists of a principal portion of $1,800 plus interest at 5% on $1,800 from the date of the contract. The payee is offering to sell the contract to a finance company in order to raise cash. If the finance company requires a return of 10% simple interest, what price will it be prepared to pay today for the contract?

Calculate the simple rate of return on a $1,000,000 181-day Treasury Bill that was issued for $970,639.

A $100,000, 91-day Province of Ontario Treasury bill was issued 37 days ago. What will it sell at today in order to yield the purchaser 3.14% simple interest?

A $100,000, 91-day Province of Ontario T-bill was purchased for $98,527.62. It was then sold for 4.8% simple interest. What profit was realized on the sale?

Sam has a bank account that pays simple interest calculated on the daily closing balance and paid monthly as follows: $0 to $5,000, 0.2%, $5,000 to $10,000, 0.25%, and over $10,000, 0.30%. Sam had $17,000 in his account on April 1. He withdrew $5,000 on April 15, withdrew another $5,000 on April 20, and deposited $2,000 on April 25. Calculate the interest that he will be paid for the month of April.