Exam 7: Applications of Simple Interest

Liam had $5,200 in student loans. On August 9, he began repayments of $50 per month when interest rates were 9.2% annually. On September 8, the interest rates rose to 9.5%. By what amount will the principal be reduced given the $50 payment on September 30?

Calculate missing value for the promissory note:

A contract requires payments of $1,700 in 50 and 100 days with interest at 6%. What is the value of the contract today if the payments are discounted to yield 7.5%?

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% rate of return?

If short-term interest rates do not change, what happens to a T-bill's fair market value as time passes?

For 90- to 365-day GICs, TD Canada Trust offered a rate of 3.00% on investments of $25,000 to $59,999 and a rate of 3.20% on investments of $60,000 to $99,999. How much more will an investor earn from a single $60,000, 270-day GIC than from two $30,000, 270-day GICs?

Calculate missing value for the promissory note:

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 0.932%.

Calculate missing value for the promissory note:

A 90-day non-interest-bearing note issued on September 30, 2013 for $5,000 was discounted at 5.75% on November 5, 2013. What were the proceeds of the note?

On September 12, Claire had $8,000 in student loans outstanding. She agreed to $125 per month payments to repay these loans. From September 12 to October 8, the interest rates were 5.0%, but decreased to 4.5% thereafter. Calculate the balance outstanding on October 31.

a) What will be the maturity value of $15,000 placed in a 120-day term deposit paying an interest rate of1.25%? b) If on the maturity date the combined principal and interest are "rolled over" into a 90-day term deposit paying1.15%, what amount will the depositor receive when the second term deposit matures?

On September 15, Miguel has student loans totalling $25,000. Miguel agreed to a $350 per month repayment schedule at which time the annual interest rate was 7.45%. Determine the balance of the loan at the end of November.

Calculate missing value for the promissory note:

Calculate missing value for the promissory note:

Determine the legal due date for: a) A 4-month note dated April 30, 2015. b) A 120-day note issued April 30, 2015.

270-Day Commercial Paper with a face value of $500,000 was sold 206 days after it was issued at a price that would provide a simple rate of interest to the purchaser of 9.85%. What was the price?

Benjamin has a $20,000 personal line of credit at prime plus 2% with his credit union. His minimum end-of-month payment is the greater of $100 or 3% of the combined principal and accrued interest. After his payment on April 30, his balance was $3,046.33. On May 23, he used his income tax refund to make a principal payment of $1,000. On July 17, he took a $7,000 advance to purchase a car. The prime rate began at 6%, rose 0.25% on June 25, and jumped another 0.25% on July 18. Prepare a loan repayment schedule showing details of payments on May 31, June 30, and July 31.

Giovando, Lindstrom & Co. obtained a $6,000 demand loan at prime plus 1.5% on April 1 to purchase new office furniture. The company agreed to fixed monthly payments of $1,000 on the first of each month, beginning May 1. Calculate the total interest charges over the life of the loan if the prime rate started at 3.75% on April 1, decreased to 3.5% effective June 7, and returned to 3.75% on August 27. Present a repayment schedule in support of your answer.

Assume that the expected cash flows from an investment and the market-determined rate of return do not change as time passes. a) What will happen to the investment's fair market value leading up to the first scheduled payment? Explain. b) If the first scheduled payment is $500, what will happen to the fair market value of the investment just after the payment is made? Explain.