Exam 7: Applications of Simple Interest

a) What will be the maturity value of $15,000 placed in a 120-day term deposit paying an interest rate of 2.25%? b) If on the maturity date the combined principal and interest are "rolled over" into a 90-day term deposit paying 2.15%, what amount will the depositor receive when the second term deposit matures?

A chartered bank offers a rate of 5.50% on investments of $25,000 to $59,999 and a 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?

A contract requires payments of $1500, $2000, and $1000 in 100, 150, and 200 days, respectively, from today. What is the value of the contract today if the payments are discounted to yield a 10.5% rate of return?

Calculate the price on its issue date of $100,000 face value, 90-day commercial paper issued by G E Capital Canada if the prevailing market rate of return is 3.932%.

Calculate missing value for the promissory note:

What will be the maturity value of $25,000 placed in a 90-day term deposit paying an interest rate of 4.75%?

Doina borrowed $7000 from her credit union on a demand loan on July 20 to purchase a motorcycle. The terms of the loan require fixed monthly payments of $1400 on the first day of each month, beginning September 1. The floating rate on the loan is prime plus 3%. The prime rate started at 5.75%, but rose 0.5% on August 19, and another 0.25% effective November 2. Prepare a loan repayment schedule presenting the amount of each payment and the allocation of each payment to interest and principal.

Ms. Wadeson obtained a $15,000 demand loan from the Canadian Imperial Bank of Commerce on May 23 to purchase a car. The interest rate on the loan was prime plus 2%. The loan required payments of $700 on the 15th of each month, beginning June 15. The prime rate was 7.5% at the outset, dropped to 7.25% on July 26, and then jumped by 0.5% on September 14. Prepare a loan repayment schedule showing the details of the first five payments.

Calculate the maturity value of a 300-day, $6,000 term deposit earning 5.15%.

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

Calculate the maturity value of a 120-day, $1000 face value note dated November 30, 2011, and earning interest at 10.75%.

The Super Savings account offered by a trust company calculates interest daily based on the lesser of each day's opening or closing balance as follows: September's opening balance was $8572. The transactions in the account for the month were a $9500 deposit on September 6, a deposit of $8600 on September 14, and a withdrawal of $25,000 on September 23. What interest will be credited to the account at the end of September?

A $100,000, 182-day Province of New Brunswick Treasury bill was issued 66 days ago. What will it sell at today to yield the purchaser 4.48%?

Monica finished her program at New Brunswick Community College on June 3 with Canada Student Loans totalling $6800. She decided to capitalize the interest that accrued (at prime plus 2.5%) during the grace period. In addition to regular end-of-month payments of $200, she made an extra $500 lump payment on March 25 that was applied entirely to principal. The prime rate dropped from 6% to 5.75% effective September 22, and declined another 0.5% effective March 2. Calculate the balance owed on the floating rate option after the regular March 31 payment. The relevant February had 28 days.

A 168-day, $100,000 T-bill was initially issued at a price that would yield the buyer 5.19%. If the yield required by the market remains at 5.19%, how many days before its maturity date will the T-bill's market price first exceed $99,000?

Calculate missing value for the promissory note:

Calculate missing value for the promissory note:

The payee on a 3-month $2700 note earning interest at 8% 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 an 11% rate of return?

Determine the legal due date for: a) A 4-month note dated April 30, 2010. b) A 120-day note issued April 30, 2010.

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 4.10%?