Exam 7: Applications of Simple Interest

An investor purchased a 91-day, $100,000 T-bill on its date of issue for $97,500, and sold it 40 days later for $98,475. What rate of return did the original investor actually realize during the 40-day holding period?

How much interest would be earned by a six-month, $30,000 Guaranteed Investment Certificate at 5.7%?

The purchaser of a 168-day T-bill with a face value of $100,000 paid $98,929.92 for it. She then sold the T-bill to a client at a rate of interest of 2%. What profit did she realize on the sale?

Calculate missing value for the promissory note:

A 90-day noted dated June 30 for $2,000 at an interest rate of 5.5% was sold on July 15, discounted at 8%. What were the proceeds of the note on July 15?

Hercules Sports obtained a $60,000 operating line of credit on March 26. Interest charges at the rate of prime plus 2.5% were deducted from its chequing account on the eighteenth of each month. Hercules took an initial draw of $30,000 on March 31, when the prime rate was 5.25%. Further advances of $10,000 and $15,000 were taken on April 28 and June 1. Payments of $5,000 and $10,000 were applied against the principal on June 18 and July 3. The prime rate rose to 5.25% effective May 14. Present a repayment schedule showing details of transactions up to and including July 18.

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

A 168-day, $100,000 T-bill was initially issued at a price that would yield the buyer 4.19%. If the yield required by the market remains at 4.19%, how many days before its maturity date will the T-bill's market price first exceed $99,000?

Calculate the price of a $25,000, 91-day Province of British Columbia Treasury bill on its issue date if the current market rate of return is 3.672%.

Calculate the maturity value of a $1,000 face value, 5-month note dated December 31, 2014, and bearing interest at 9.5%.

Calculate missing value for the promissory note:

Calculate missing value for the promissory note:

Kari had Canada Student Loans totalling $3,800 when she completed her program at Niagara College in December. She had enough savings at the end of June to pay the interest that had accrued during the 6-month grace period. Kari made arrangements with her credit union to start end-of-month payments of $60 in July. She chose the fixed interest rate option (at prime plus 5%) when the prime rate was at 5.5%. Prepare a loan repayment schedule up to and including the September 30 payment.

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 interest rates were 7.0%, but increased to 7.5% thereafter. Calculate the amount of interest paid for the month of February.

McKenzie Wood Products negotiated a $200,000 revolving line of credit with the Bank of Montreal at prime plus 2%. On the 20^th of each month, interest is calculated (up to but not including the 20^th) and deducted from the company's chequing account. If the initial loan advance of $25,000 on July 3 was followed by a further advance of $30,000 on July 29, how much interest was charged on July 20 and August 20? The prime rate was at 3% on July 3 and fell to 2.75% on August 5.

A $100,000, 168-day Government of Canada Treasury bill was purchased on its date of issue to yield 3.7%. a) What price did the investor pay? b) Calculate the market value of the T-bill 85 days later if the annual rate of return then required by the market has: (i) risen to 4%. (ii) remained at 3.7%. (iii) fallen to 3.4%. c) Calculate the rate of return actually realized by the investor if the T-bill is sold at each of the three prices calculated in part (b).

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 interest rate did Lydia earn during the 60-day period? (Taken from CIFP course materials.)

On May 1, Gladis borrowed $10,000 on a line of credit with an annual rate of 7.75%. On August 15, Gladis repaid half of the loan. From August 15 to December 31, the interest rate decreased to an annual rate of 7.50%. Determine the total interest charged from May 1 to December 31, when Gladis repaid all obligations.

A $5,000 demand loan was advanced on June 3. Fixed monthly payments of $1,000 were required on the first day of each month beginning July 1. Prepare the full repayment schedule for the loan. Assume that the interest rate remained at 8.75% for the life of the loan.

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 interest to be paid from January 5^th to August 15^th.