Exam 6: Simple Interest

Mr. & Mrs. Parsons are considering two offers to purchase their summer cottage. Offer A is for $200,000 consisting of an immediate $40,000 down payment with the $160,000 balance payable one year later. Offer B is for $196,500 made up of a $30,000 down payment and the $166,500 balance payable in six months. a) If money can earn 4%, what is the current economic value of each offer? b) Other things being equal, which offer should the Parsons accept? What is the economic advantage of the preferred offer over the other offer? c) If money can earn 6%, which offer should the Parsons accept? What is the economic advantage of the preferred offer?

Sam borrowed $1,250 on March 15 at an interest rate of 4.5%. Sam repaid the full amount plus the interest owed on September 1. How much did Sam repay?

Calculate the maturity value of a loan of $6,875 after 239 days at 18.3%.

$12,000 due today is to be replaced by three equal payments in 30, 60 and 90 days from today. If interest is 8.4% annually, determine the value of the payments. Use a focal date of today.

Ninety days ago Stella signed an agreement with Manon requiring her to make three payments of $400 plus interest 90, 150, and 210 days, respectively, from the date of the agreement. Each payment was to include interest on the $400 principal at the rate of 13.5% from the date of the agreement. Stella now wants Ed to renegotiate the agreement and accept a single payment 30 days from now, instead of the three scheduled payments. What payment should Manon require in the new agreement if money is worth 8.5%?

Sam earned $650 on an investment deposited at an interest rate of 3.25% for 30 months. How much was the original investment?

Calculate the missing value:

Calculate the equivalent value of the scheduled payments if money can earn the rate of return specified in the last column. Assume that any payments due before today have been missed.

A $9,000 loan is to be repaid in three equal payments occurring 60, 180, and 300 days, respectively, after the date of the loan. Calculate the size of these payments if the interest rate on the loan is 7.25%. Use the loan date as the focal date.

If $450,000 is invested on June 3 at 7.75%, what will be the value of the investment on December 11?

Morton purchased a 165-day Guaranteed Investment Certificate on October 11. On what date will it mature?

A loan of $10,000 is to be repaid by three payments of $2,500 due in two, four, and six months, and a fourth payment due in eight months. What should be the size of the fourth payment if an interest rate of 11% is charged on the loan? Use today as the focal date.

What amount invested at 4.5% on November 19, 2014 had a maturity value of $10,000 on March 3, 2015?

What payment 5 months from now would be equivalent in value to a $4,000 payment due today and a $3,000 payment due 7 months from now? Money can earn 6.5%.

Nine months ago, Muriel agreed to pay Aisha $1,200 and $800 on dates 6 and 12 months, respectively, from the date of the agreement. With each payment Muriel agreed to pay interest at the rate of 8.5% from the date of the agreement. Muriel failed to make the first payment and now wishes to settle her obligations with a single payment four months from now. What payment should Aisha be willing to accept if money can earn 6.75%?

Payments of $1,400 and $2,500 were due 90 days ago and 120 days ago, respectively. What is the combined economic value today of these payments if money can earn 9%?

On what date did a corporation borrow $350,000 at 7.5% from its bank if the debt was settled by a payment of $356,041 on February 28?

A 9-month term deposit, earning interest at 7%, was worth $72,559 when it reached maturity today. How much had been invested at the beginning of the term?

What was the principal amount of a loan at 9.5% if $67.78 of interest accrued from October 28, 2013 to April 14, 2014?

Ace Furniture will give you 8 months, interest free, before you have to pay for a $2,000 sofa. Based on the fact that Ace pays 14% on its short term debt, what would be a reasonable amount of cash for you to offer them at the time of purchase?