Question 1

For the following promissory note, determine the amount of interest due at maturity.
$3000.00 Oakville, Ontario January 15, 2013. Six months
after date we promise to pay to the order of Hughes
Pet Supply Company * * * * * * * *EXACTLY* * * * * * *
3000.00* * * * * * * * * * *DOLLARS at Hughes Pet Supply
Company for value received with interest
at 9.00% per annum.
Due ____________________ (Seal) ____________________
(Seal) ____________________

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Question 2

Find the maturity value of a 60-day, 4% note for $3000 note dated February 25, 2011.

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Question 3

You purchase a 182-day treasury bill for $240,000 at a rate of 3.546%. What did you sell it for 111 days before maturity if the new interest rate is 3.778%?

Accepted Answer

A)  $238220.20 
B)  $238320.20 
C)  $238200.20 
D)  $238100.20 
E)  $241469.24

Question 4

Find the maturity value of a six-month, $642 note dated November 1, 2013, earning interest at 7.5%.

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Question 5

Government of Manitoba 364-day T-bills with a face value of $2 000 000 were purchased on April 17 for $1 945 970. The T-bills were sold on May 25 for $1946 340.
a) What was the market yield rate on April 17?
b) What was the yield rate on May 25?
c) What was the rate of return realized?

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Question 6

Use the design shown in Figure 8.1 to construct a complete repayment schedule including the totaling of the Amount Paid, Interest Paid, and Principal Repaid columns for the following loan.
On April 22, Tim borrowed $2900.00 from Keewatin Credit Union at 6.5% per annum calculated on the daily balance. He gave the Credit Union four cheques for $535.00 dated the 15th of each of the next four months starting May 15 and a cheque dated October 15 for the remaining balance to cover payment of interest and repayment of principal.
-FIGURE 8.1 Basic Design of a Loan Repayment Schedule

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Question 7

Find the present value and the amount of discount for a four-month non-interest-bearing note for $9 180 issued December 2, 2014, if money is worth 7.2% on February 28, 2015.

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Question 8

Darren purchased $250 000 in 364-day T-bills 315 days before maturity to yield 2.86%. After holding it for 120 days, Darren sold the T-bill for a yield of 3.25%.
a) How much did Darren pay for the T-bills?
b) For how much did Darren sell the T-bills?
c) What rate of return (per annum) did Darren realize on the investment?

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Question 9

Calculate the maturity value of a 180-day note for $4 000 dated August 18 if the rate of interest is 7.5%.

Accepted Answer

A)  4147.95 
B)  4150.41 
C)  5479.45 
D)  5504.11 
E)  4440.41

Question 10

The owner of Easy Clips borrowed $8800.00 from Red Deer Community Credit Union on June 17. The loan was secured by a demand note with interest calculated on the daily balance and charged to the store's account on the 5th day of each month. The loan was repaid by payments of $2500.00 on July 25, $2300.00 on October 17, and $3500.00 on December 30. The rate of interest charged by the credit union was 6.5% on June 17. The rate was changed to 6.65% effective July 1 and to 6.95% effective November 1. Determine the total interest cost on the loan, up to and including Dec. 30.

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Question 11

Determine the maturity value of a 120-day note for $2 260.00 dated May 9 and bearing interest at 5.66%.

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Question 12

Find the maturity value of a $1 190, 7.275%, 120-day note dated February 5, 2013.

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Question 13

The East Lake Karate Club arranged short-term financing of $41 500.00 on July 27 with the Bank of Commerce and secured the loan with a demand note. The club repaid the loan by payments of $13 000.00 on September 25, $7 500.00 on November 17, and the balance on December 20. Interest calculated on the daily balance and charged to the club's current account on the last day of each month, was at 8.5% per annum on July 27. The rate was changed to 8.75% effective September 1 and to 9.14% effective December 1. Determine the total interest cost.

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Question 14

A 60-day non-interest-bearing promissory note for $10 000 is dated June 1, 2013. Compute the present value of the note on June 14, 2013, if money is worth 5%.

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Question 15

A 4-month, 7.26% percent promissory note dated June 10, 2013 has a maturity value of $6 231.34. What is the face value of the note?

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Question 16

You bought $150 000 in 364-day T-bills. The T-bills were discounted at a rate of 4.432%. If you paid $148 811.24 for the T-bills, how many days before maturity did you buy it?

Accepted Answer

A)  6.527 days 
B)  605.27 days 
C)  56.27 days 
D)  52.67 days 
E)  65.79 days

Question 17

A government of Ontario 364-day T-bills with a face value of $50 000 were purchased on January 2 for $48 000.76. The T-bills were sold on September 28 for $48 999.99.
a) What was the market yield rate on January 2?
b) What was the yield rate on September 28?
c) What was the rate of return realized?

Accepted Answer

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Question 18

An investor purchased $250 000 in 91-day T-bills on the issue date for $248 157.56. After holding the T-bills for 37 days, she sold them for a yield of 3.25%.
a) What was the original yield of the T-bills?
b) For how much did the investor sell the T-bills?
c) What rate of return (per annum) did the investor realize while holding this T-bill?

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Question 19

The maturity value of a five-month promissory note issued May 31, 2013, is $2 134.00. What is the present value of the note on the date of issue if money is worth 6.3%?

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Question 20

Find the present value on June 1, 2014 of a non-interest-bearing note for $950 issued February 2, 2014, for 210 days if money is worth 8.31%.

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Exam 8: Simple Interest Applications