Exam 6: Simple Interest

Calculate the missing value:

Two payments of $5,000 are to be received four and eight months from now. a) What is the combined equivalent value of the two payments today if money can earn 6%? b) If the rate of interest money can earn is 4%, what is the payments' combined equivalent value today?

What was the interest rate on a $1750 loan if the amount required to pay off the loan after five months was $1,828.02?

Calculate the missing value:

Westwood Homes is beginning work on its future College Park sub-division. Westwood is now pre-selling homes that will be ready for occupancy in nine months. Westwood is offering $5,000 off the $295,000 selling price to anyone making an immediate $130,000 down payment (with the balance due in nine months.) The alternative is a $5,000 deposit with the $290,000 balance due in nine months. Mr. and Mrs. Symbaluk are trying to decide which option to choose. They currently earn 4.8% on low-risk short-term investments. a) What is the current economic cost of buying on the $130,000-down $5,000-off option? b) What is the current economic cost of buying on the $5,000-deposit full-price option? c) Which alternative should the Symbaluks choose? In current dollars, what is the economic advantage of the preferred alternative?

Sam has won a lottery. He can take $5,000 now or $5,500 in one year. If money can earn 8%, which option should he choose?

The balance after 11 months, including, on a loan at 9.9% is $15,379.58. What are the principal and interest components of the balance?

$22,000 was due 90 days ago. It is now to be repaid in three equal payments in 30, 60 and 180 days from now. If interest is 5.92% annually, determine the value if the focal date is today.

Calculate the missing value:

$7,500 was due 3 months ago. It is now to be repaid in three equal payments in 4, 8 and 10 months from now. If interest is 3.85% annually, determine the value if the focal date is in 4 months.

Sheldrick Contracting owes Western Equipment $60,000 payable on June 14. In late April, Sheldrick has surplus cash and wants to settle its debt. If Western can earn 3.6% on its money, how much should Western accept on April 29?

Kris has borrowed $2,000 and has agreed to repay the loan in two payments in nine and fifteen months. Each payment is $1,000 of principal and interest at the rate of 7%. Kris wants to settle the debt in six months. What single equivalent payment should she make if money is now worth 5%?

A payment stream consists of three payments:$1000 today, $1500 in 70 days, and $2000 in 210 days. What single payment, 60 days from now, is economically equivalent to the payment stream if money can be invested at a rate of 8.5%?

A loan of $4,000 at 13% is to be repaid by three equal payments due four, six, and eight months after the date on which the money was advanced. Calculate the amount of each payment.

Calculate the amount of interest that would be earned on an account of $59,500 at 7.2% for 133 days.

Calculate the size of the equal payments. Use the loan date as the focal date.

We frequently hear a news item that goes something like: "Joe Superstar signed a 5-year deal worth $25 million. Under the contract he will be paid $3 million, $4 million, $5 million, $6 million and $7 million in successive years." In what respect is the statement incorrect? How should the value of the contract be calculated?

What amount received on January 13 is equivalent to $1,000 received on the preceding August 12 if money can earn 5.5%?

How much interest could you earn over 7 months on an investment of $49,000 at 14.75%?

How can you determine whether two payments are equivalent to each other?