Question 1

Thad is planning to buy a rototiller next spring at an expected price of $579. In the current fall "flyer" from Evergreen Lawn and Garden, the model he wants is advertised at $499.95 in a Fall Clearance Special.
a) If money can earn 4%, what is the economic value on the preceding September 15 of the $579 that Thad will pay to purchase the rototiller next April 1? (Assume that February has 28 days.)
b) What are his true economic savings if he purchases the rototiller at the sale price of $499.95 on September 15?
c) What interest rate would money have to earn for Thad to be indifferent between buying the rototiller at $499.95 on September 15 versus buying it for $579 on the subsequent April 1?

Accepted Answer

The answer of Thad is planning to buy a rototiller...

Question 2

Nicholas can purchase the same furniture from Store A for $2,495 cash or from Store B for $2,560 with nothing down and no payments or interest for 8 months. Which option should Nicholas choose if he can pay for the furniture by cashing in Canada Savings Bonds currently earning 3.9% per annum?

Accepted Answer

The answer of Nicholas can purchase the same furniture from...

Question 3

Calculate the maturity value of an investment of $22,500 after 9 months at 13.45%.

Accepted Answer

A)  $20,438.29 
B)  $4,736.25 
C)  $2,269.69 
D)  $27,236.25 
E)  $24,769.69

Question 4

A $7,500 loan will be paid off by four equal payments to be made 2, 5, 9, and 12 months after the date of the loan. What is the amount of each payment if the interest rate on the loan is 9.9%?

Accepted Answer

The answer of A $7,500 loan will be paid off...

Question 5

Judith received the proceeds from an inheritance on March 25. She wants to set aside enough on March 26 so that she will have $20,000 available on October 1 to purchase a car when the new models are introduced. If the current interest rate on 181- to 270-day term deposits is 3.75%, what amount should she place in the term deposit?

Accepted Answer

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Question 6

Sergon has $5,000 to invest for six months. The rates offered on three-month and six-month term deposits at his bank are 3.5%3.8%, respectively. He is trying to choose between the six-month term deposit and two consecutive three-month term deposits. What would the simple interest rate on three-month term deposits have to be, three months from now, for Sergon to end up in the same financial position with either alternative? Assume that he would place both the principal and interest from the first three-month term deposit in the second three-month term deposit.

Accepted Answer

The answer of Sergon has $5,000 to invest for six...

Question 7

Determine the amount of (simple) interest that would be earned over eight months at 26% on an investment of $43,500.

Accepted Answer

A)  $11,309.99 
B)  $2,352.48 
C)  $7,540.00 
D)  $6,786.00 
E)  $5,367.03

Question 8

In how many months will $6,000 earn interest of $2,700 at 15%?

Accepted Answer

A)  3 months 
B)  36 months 
C)  4 months 
D)  60 months 
E)  1 month

Question 9

A $3000 loan at 5% was made on March 1. Two payments of $1000 each were made on May 1 and June 1. What payment on July 1 will pay off the loan?

Accepted Answer

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Question 10

An $8,000 loan at an interest rate of 6.5% is to be repaid in three equal payments at six months, nine months, and one year later. Determine the size of the equal payments.

Accepted Answer

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Question 11

What amount of interest will be earned on $1,500 invested for 18 months at an interest rate of 4%?

Accepted Answer

The answer of What amount of interest will be earned...

Question 12

Joyce had $2,149 in her daily interest savings account for the entire month of June. Her account was credited with interest of $2.65 on June 30 (for the exact number of days in June). What annual rate of simple interest did her balance earn?

Accepted Answer

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Question 13

What payment on August 19 is equivalent to a $1,000 payment on the preceding January 19, if the rate of interest is 4.5%?

Accepted Answer

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Question 14

What amount of money paid today is equivalent to $560 paid five months from now if money can earn 1.75% per annum?

Accepted Answer

The answer of What amount of money paid today is...

Question 15

If $4,000 is to be paid now. What amount would be equivalent 97 days earlier given an interest rate of 4.25% per year?

Accepted Answer

A)  $3,955.33 
B)  $3,844.22 
C)  $3,733.11 
D)  $3,622.00 
E)  $4,421.67

Question 16

The interest owed on a loan after 5 months was $292.50. If the simple interest rate charged on the loan was 0.9% per month, what was the amount borrowed?

Accepted Answer

The answer of The interest owed on a loan after...

Question 17

Seven months ago Julie received some money for her birthday and she immediately deposited it into an account earning 6.5%. Today the value of that deposit has reached $4,259.88. How much did she deposit 7 months ago?

Accepted Answer

A)  $1,556.20 
B)  $4,104.26 
C)  $4,098.36 
D)  $3,982.99 
E)  $2,646.45

Question 18

How many months would it take to earn $3,300 on a deposit of $84,000 at 9 ½%?

Accepted Answer

A)  4.14 months 
B)  4.96 months 
C)  11.2 months 
D)  15.3 months 
E)  25.4 months

Question 19

Calculate the missing values:

Accepted Answer

The answer of Calculate the missing values: ...

Question 20

Calculate the amount of interest that would be earned on an account of $344,000 if it earned 4.95% for 37 days.

Accepted Answer

A)  $17,028 
B)  $11,124 
C)  $991 
D)  $1,726 
E)  $2,110

Exam 6: Simple Interest