Exam 7: Applications of Simple Interest

An investor is prepared to buy short-term promissory notes at a price that will provide him with a return on investment of 12% simple interest. What amount would he pay on August 9 for a 120-day note dated July 18 for $4,100 with interest at 10.25% pa?

On January 5, Steven received a $25,000 advance on a revolving line of credit at 3.75% annual rate. On march 5, the annual rate increased to 4.25%. Determine the simple interest to be paid from January 5^th to August 15^th.

Debra paid $99,615 for a $100,000 T-bill with 30 days remaining until maturity. What (annual) rate of interest will she earn? (Taken from CIFP course materials.)

An investment promises two payments of $500, 90 and 150 days from today. What price will an investor pay today if her required rate of return is 6.5% simple interest?

A contract requires payments of $1,000, $2,000, and $3,000 in 90, 120, and 150 days respectively, from today. What is the value of the contract today if the payments are discounted to yield a 6% simple interest rate of return?

Calculate missing value for the promissory note:

The payee on a 3-month $2,700 promissory note earning interest at 4% simple interest wishes to sell the note to raise some cash. What price should she be prepared to accept for the note (dated May 19) on June 5 in order to yield the purchaser a 7% rate of return?

What will be the maturity value of $15,000 placed in a 120-day term deposit paying a simple interest rate of 2.75%, if the term deposit proceeds are reinvested into another 120-day term deposit paying 3.5%?