Exam 8: Simple Interest Applications

A $2850, five-month promissory note with interest at 6.15% is issued on June 1. Compute the proceeds of the note on August 13, when money is worth 7.5%.

Find the present value of a non-interest-bearing seven-month promissory note for $1800 dated August 27, 2012, on December 4, 2012, if money is then worth 8.375%.

What is the price of a 91-day, $50 000 Government of Canada treasury bill that yields 1.97% per annum?

Raymond borrowed $3900.00 from Airdrie Regional Savings. The line of credit agreement provided for repayment of the loan in four equal monthly payments plus interest at 9.56% per annum calculated on the unpaid balance. Determine the total interest cost.

Aslam borrowed $23 000 from Meridian Credit Union at 4% p.a. and agreed to repay the loan in monthly instalments of $3000 each, such payments to cover interest due and repayment of principal. Construct a complete repayment schedule.

Compute the present value of a 150-day non-interest-bearing promissory note for $5000 dated June 15, if the note was sold on August 21 and money is worth 6.5%.

Average rate of return or yield on 180-day Government of Canada treasury bills sold on June 18, 2013 was 1.04%. The client sold the $50 000 T-bill after 39 days. What rate of return (per annum) did the client realize while holding the T-bill, if the short term interest for this maturity had risen to 1.13% by the date of sale?

For the following promissory note, determine the amount of interest due at maturity.

Arazasa Equipment Inc. (AEI) is planning to setup a small business importing and supplying medical equipment to the doctor's offices in British Columbia. The bank has setup a line of credit allowing AEI to import the equipment. The company received an initial advance of $100 000 on its revolving demand loan on April 1, 2016. On the 27th of each month, interest is calculated up to but not including 27th of the month. It is then deducted from AEI's deposit account. Because of the lack of credit history, the bank charged an interest rate of 9.75% but dropped it to 9.5% on April 17. On May 1, another $100 000 was drawn on the line of credit. How much interest did AEI pay by May 25?

Find the proceeds of a six-month note for $966 dated September 16, 2012, with interest at 5.45% if money is worth 5.75% on November 4, 2012.

Lee is planning to buy furniture worth $7000 from Leons. He can buy on his MasterCard and pay it within 7 days following the grace period of 21 days. His second option is to buy on the personal (unsecured) line of credit and pay it back after 6 months. His third option is to use secured line of credit and pay it back in 9 months. MasterCard charges an interest rate of 19.9%. Unsecured line of credit charges a rate of prime (3%) plus 3% and secured line of credit charges a rate of prime plus 0.5%. What is his best option?

You take out a demand loan on February 17th, in a non-leap year, with a local financing company. The loan is for $4500 at an interest rate of 12.15%. The interest rate rises to 12.75% on March 18th and then goes down to 12.25% on April 29th. You make partial payments of $900 on March 2nd and $1700 on May 14th. The loan is demanded in full on June 21st. What is the size of the final payment?

Government of Manitoba 364-day T-bills with a face value of $2 000 000 were purchased on April 17 for $1 945 970. The T-bills were sold on May 25 for $1 946 340. a) What was the market yield rate on April 17? b) What was the yield rate on May 25? c) What was the rate of return realized?

Sean purchased a 182-day, $10 000 T-bill on its issue date for $9754.25. What was the original yield of the T-bill?

Find the present value on June 1, 2014 of a non-interest-bearing note for $950 issued February 2, 2014, for 210 days if money is worth 8.31%.

You bought $150 000 in 364-day T-bills. The T-bills were discounted at a rate of 4.432%. If you paid $148 811.24 for the T-bills, how many days before maturity did you buy it?

Caprice buys a painting on his credit card for $14 990. She pays her credit card in full 3 days after the grace period of 11 days using her secured line of credit, which charges her prime plus 1%. She repays her loan in 168 days. The prime rate is 2.5% on the day of repayment of credit card loan and increases to 3% 90 days after that day. If her credit card company charges her a rate of 28% after the grace period, what is the total amount of interest paid on the purchase of the painting?

PC Financial approved a $75 000 line of credit on a demand basis to Little Blessings day care to finance equipment. Interest at the rate of prime plus 1% is charged to the account at the bank on the 15th of each month. The initial advance was $45 000 on July 15, when the prime rate stood at 3%. There were further advances of $8000 on August 20 and $10 000 on September 10. Payments of $15 000 each were applied against the principal on October 1 and November 1. What was the total interest accumulated on the loan for the period July 15 to November 15?

A non-interest bearing promissory note has a $3100 maturity value and it matures in 90 days. You decide to sell the note 17 days before the legal due date. How much money do you sell it for if money is worth 5.15%?

Amertech borrowed $32 000.00 from Balzac Credit Union on May 17 at 12%. The interest rate was changed to 14.11% effective July 1 and to 13.27% effective October 1. The loan was repaid by payments of $17 000.000 on July 15 and the balance, including the accumulated interest, on November 20. How much did the loan cost?