Question 1

You invest $800 on May 25,2007,on what day will you have earned exactly $31.96 of interest if your investment earns simple interest at r = 6%?

Accepted Answer

A) August 31,2007 
B) January 20,2008 
C) January 23,2008 
D) January 25,2008

Question 2

A loan of $15,000 was repaid as follows: $8000 in 4 months,$150 in 6 months and a payment of $X in 9 months which will fully pay off the loan.If the rate of simple interest on the loan is 10%,what is the value of X according to the Merchant's rule?

Accepted Answer

A) $7637.92 
B) $7641.67 
C) $7661.88 
D) $7700.83

Question 3

A bank offers you a 9 month discounted loan,at a simple discount rate of d = 9.5%.In order to receive $5000 today,what size loan should you ask for?

Accepted Answer

A) $5383.58 
B) $5356.25 
C) $5000.00 
D) $4643.75

Question 4

A $10,000 91-day T-Bill was purchased for $9889.05 to yield 4.5%.The T-bill is sold 32 days later to an investor who wishes to yield 4.15%.At what price is the T-bill sold?

Accepted Answer

A) $9897.59 
B) $9925.03 
C) $9928.06 
D) $9933.36

Question 5

An invoice for $12,000 has terms 1/20,n/45.If you take out a loan to take advantage of the discount and the bank uses ordinary interest (i.e.the banker's rule),what is the maximum rate of simple interest that you would be willing to pay?

Accepted Answer

A) 8.08% 
B) 8.19% 
C) 14.55% 
D) 14.75%

Question 6

What simple discount rate d is equivalent over a 200-day period to simple interest rate of 8% for the first 100 days and 10% thereafter,if interest from the first 100 days does not earn interest during the last 100 days?

Accepted Answer

A) 9.11% 
B) 9.00% 
C) 8.68% 
D) 8.58%

Question 7

You buy goods for $10,000 and receive an invoice with terms 1/10,n/40.What is the maximum simple interest rate that you would borrow money at to take advantage of the discount?

Accepted Answer

A) 9.13% 
B) 9.22% 
C) 12.17% 
D) 12.29%

Question 8

What was the interest rate on the loan?

Accepted Answer

A) 10.79% 
B) 11.15% 
C) 10.50% 
D) 10.65%

Question 9

You invest $20,000 in a fund that earns simple interest at r = 7% for 2 years,followed by simple interest at r = 5% for 3 years.How much will you have at the end of 5 years?

Accepted Answer

A) $25,800.00 
B) $26,220.00 
C) $26,507.30 
D) $26,050.50

Question 10

A loan of P is taken out at a simple interest rate of r = 10.4%.Two months later,a partial loan payment of $500 is made.Of this payment,$301.34 went towards paying interest on the loan while $198.66 went to reducing the outstanding balance of the loan.What is the value of P? (Answer to nearest dollar)

Accepted Answer

A) $2898 
B) $3096 
C) $11,461 
D) $17,385

Question 11

You take out a loan of $A at a simple interest rate of r for n-days (n > 0).Under exact interest,you have to pay back $8230 at the end of n-days.If ordinary interest is used instead,what would be the amount to be paid back at the end of n-days?

Accepted Answer

A) $8,230 
B) More than $8230 
C) Less than $8230 
D) Need more information to determine

Question 12

A loan of $5000 is taken out on May 25.The interest rate on the loan is r = 12%.A payment of $105 is made 102 days later and a payment of X,is due 175 days after May 25.What is X if the declining balance method is used?

Accepted Answer

A) $5180.15 
B) $5182.67 
C) $5184.18 
D) $5287.67

Question 13

A retailer buys goods from a supplier for $8000.The goods cost the supplier $7750.The retailer signs a non-interest bearing promissory note due in 120 days.After 10 days,the supplier sells the note to a bank that discounts the note using a simple interest rate of 10%.What rate of return,r,did the supplier earn over the 10 days?

Accepted Answer

A) 0.1% 
B) 4.6% 
C) 7.5% 
D) 9.6%

Question 14

A deposit of $25,000 is made on February 28th,2007.Given a simple discount rate of d = 8%,what is the accumulated value of the $25,000 on May 18th,2007,assuming the bankers rule for t?

Accepted Answer

A) $25,446.73 
B) $25,440.50 
C) $25,438.89 
D) $25,432.88

Question 15

The note was sold 132 days prior to the maturity date to a bank.The bank pays $14,655.23 for the note.What rate of simple discount,d,did they use to determine this price?

Accepted Answer

A) 5.91% 
B) 6.43% 
C) 6.58% 
D) 6.74%

Question 16

An investor bought a 91-day $25,000 Treasury Bill to yield r = 3.5%.The investor sold the T-bill 40 days later to another investor who wishes to yield r = 3.25%.What price did the T-bill sell for?

Accepted Answer

A) $25,104.15 
B) $25,089.04 
C) $24,886.99 
D) $24,880.37

Question 17

A debt of $5000 is to be paid off by installments of $2000 30-days from now,$2500 60-days from now,and a final payment of $613.68 d-days from now.If simple interest is charged at r = 12% and the declining balance method is used,what is the value of d?

Accepted Answer

A) 245 
B) 240 
C) 180 
D) 111

Question 18

How long will it take $2000 to accumulate to $2119.63 at a simple discount rate of 10%?

Accepted Answer

A) 206 days 
B) 215 days 
C) 218 days 
D) 223 days

Question 19

You owe the bank $2000 in 9 months.Instead you negotiate with the bank to pay $1200 in 3 months and $X in 7 months to fully pay off the loan.Using a simple discount rate of d = 9% and a focal date of 7 months from now,what is X?

Accepted Answer

A) $732.89 
B) $734.44 
C) $866.46 
D) $877.08

Question 20

A person borrows $4000 at a simple interest rate of 7%.They agree to repay the loan with payments of X at the end of 2 months,2X at the end of 4 months,and 2X at the end of 6 months.Using 6 months as the focal date,what is X?

Accepted Answer

A) $798.20 
B) $809.12 
C) $820.34 
D) $828.00

Exam 1: Simple Interest and Simple Discount