Question 1

You invest $8000 in a fund earning simple interest at r = 4% for the first 150 days followed by r = 6% for the last 120 days.How much do you have in your fund at the end of 270 days?

Accepted Answer

A)  $8291.91
B)  $8289.32
C)  $8287.24
D)  $8284.72 B

Question 2

A man takes out a loan at a simple discount rate of d = 7.5%.If the amount he pays back in 11 months is $8235,what is the fee he pays for borrowing the money and when does he pay this fee?

Accepted Answer

A)  $529.74,paid today at issue of the loan
B)  $529.74,paid at the end of 11 months
C)  $566.16,paid today at issue of the loan
D)  $566.16,paid at the end of 11 months C

Question 3

Andrew has a promissory note for $15,000 dated April 6,2010.The note has a legal due date 123 days later,with simple interest at 12%.Andrew sells the note on June 1,2010 to a bank charging a simple interest rate of 15%.What are the proceeds of the sale?

Accepted Answer

A)  $15,202.77
B)  $15,188.40
C)  $15,184.55
D)  $15,170.17 B

Question 4

Which of the following statements is TRUE?

Accepted Answer

A)  An investment earning simple interest at rate r always earns less interest compared to the same investment using a compound interest rate of j1 = r.
B)  When discounting a promissory note,the larger the simple interest rate used to discount the note,the larger will be the proceeds of the note.
C)  On a loan,interest calculated using ordinary interest is always less than that calculate using exact interest.
D)  If a simple discount rate of d is equivalent to a simple interest rate of r,then d < r as long as time t is positive.

Question 5

You have two options available in repaying a loan.You can pay $200 at the end of 5 months and $300 at the end of 10 months or you can pay $X at the end of 3 months and $2X at the end of 6 months.What is X if the simple interest rate is 6% and the focal date is at the end of 5 months.

Accepted Answer

A)  $169.16
B)  $168.05
C)  $164.22
D)  $163.14

Question 6

A loan was taken out on March 3,2010 at a simple interest rate of 8%.Interest is to be calculated using ordinary interest (Banker's rule).The amount repaid in 6 months is $12,482.67.What was the original amount of the loan?

Accepted Answer

A)  $11,992.32
B)  $11,998.77
C)  $12,002.57
D)  $12,003.83

Question 7

A bank gives a customer $30,000 on June 5,2001.What is the amount to be repaid after 3 months if the bank charges d = 7%?

Accepted Answer

A)  $30,525.00
B)  $30,529.32
C)  $30,534.35
D)  $30,538.82

Question 8

The note is sold to Kim on December 21,2007.Kim discounts the note at a simple interest rate of r = 15%.How much does Kim pay for the note?

Accepted Answer

A)  $10,298.48
B)  $10,211.81
C)  $10,224.10
D)  $10,168.49

Question 9

A loan is to be paid by installments of $800 1-month from now,$600 3-months from now,and $500 4-months from now.Instead of this payment scheme,the borrower wishes to make one single payment 2 months from now.What is the amount of the alternative single payment using a focal date of 3 months and r = 6%?

Accepted Answer

A)  $1905.51
B)  $1901.00
C)  $1896.03
D)  $1890.55

Question 10

On March 24,2014,Chen and Mary borrow $18,000 each at a simple interest rate r = 12%.Chen's bank calculates interest using exact interest,while Mary's bank uses the Banker's Rule (ordinary interest).Let X = amount Chen pays back on September 24,2014,and Y = amount Mary pays back on September 24,2014.What is the value of X - Y?

Accepted Answer

A)  -$15.12
B)  -$8.88
C)  $8.88
D)  $15.12

Question 11

A 180-day discounted loan is taken out today from a bank that charges a simple discount rate of d = 9%.The bank also uses ordinary interest in determining the value of t (time).If the amount to be paid back in 180 days is $3000,how much money is actually received today?

Accepted Answer

A)  $2865.00
B)  $2866.85
C)  $2870.81
D)  $2872.5

Question 12

A man takes out a discounted loan at a simple discount rate of d = 10.5%.If the amount he pays back in 9 months is $5712,how much money does he actually receive today?

Accepted Answer

A)  $5112.24
B)  $5262.18
C)  $5295.02
D)  $5332.00

Question 13

A debt of $60,000 is to be paid off with partial payments of $20,000 in 20-days (from today),$1500 in 60-days (from today)and a final payment of $X in 85-days (from today).If simple interest is charged at 16% and the declining balance method is used,what is X?

Accepted Answer

A)  $40,149.32
B)  $40,172.09
C)  $40,180.74
D)  $41,585.76

Question 14

A 90-day promissory note with face value $5000,has a maturity value of $5127.40.After 30-days,it is sold to a bank that charges a simple discount rate of d = 10%.What rate of simple interest did the original owner of the note earn?

Accepted Answer

A)  9.47%
B)  9.83%
C)  10.49%
D)  10.82%

Question 15

Which of the following statements is (are)true with respect to simple interest loans repaid by a series of partial payments?
(I)Using the Declining Balance Method,a partial payment is not deducted from the outstanding balance at the time the partial payment is made if the partial payment is greater than the interest due at the time.
(II)The total interest paid over the term of the loan will be the same under the Merchant's Rule and the Declining Balance Method.

Accepted Answer

A)  Both are true
B)  (I) only
C)  (II) only
D)  None are true

Question 16

A loan of $12,000 is taken out today at a simple interest rate of r = 15%.It is repaid with a payment of $200 in 3-months,$6000 in 6-months (from today)and the balance,X,due in 11 months (from today).What is the value of X using the declining balance method?

Accepted Answer

A)  $7055.00
B)  $7131.25
C)  $7118.75
D)  $7128.71

Question 17

A loan of $P is taken out.It is to be repaid with a payment of $2000 in 2 months,$50 in 6 months and a final payment due in 10 months.If the merchant's rule is used,the final payment turns out to be $3000.If the rate of simple interest on the loan is r = 12%,what is P?

Accepted Answer

A)  $4733.51
B)  $4735.23
C)  $4736.36
D)  $4738.18

Question 18

What rate of simple interest,r,is equivalent to a rate of simple discount,d = 9%,over a period of 10 months?

Accepted Answer

A)  8.25%
B)  8.37%
C)  9.73%
D)  9.89%

Question 19

Mary deposits $15,000 in a bank account earning simple interest rate r = 5.25% on October 25,2013 and leaves it on deposit until February 4,2014.Using exact interest,how much interest is earned during the entire investment period?

Accepted Answer

A)  $217.91
B)  $223.13
C)  $220.07
D)  $222.23

Question 20

A 6-month non-interest bearing promissory note with a face value of $2500 is taken out on Jan.5,2007.What are the proceeds on Feb.12,2007 if the note is discounted using a simple interest rate of r = 10%?

Accepted Answer

A)  $2380.02
B)  $2403.85
C)  $2405.75
D)  $2497.40

Exam 1: Simple Interest and Simple Discount