Simple Interest Determining Time Period and Maturity Value (Solutions) PDF

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Simple Interest Determining Time Period and Maturity Value (Solutions)...

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Winter 2018 J.Gregorio

Simple Interest: Determining Time Period ●

Whenever possible the time period of a loan/investment should be determined using the exact number of days in the term.

Calculating the Number of Days Between Dates: ●

We will use the date function on the financial calculator to determine the exact number of days in a term.

Steps: 1.

2. DT1: mm.ddyy

3. DT2: mm.ddyy

4. DBD Examples 1. Calculate the term and the interest for a loan of $11,550 from April 28, 2011 to November 3, 2011 at 9 41% . Term: 189 days Interest: $553.21

2. Calculate the term and the interest for a loan of $8700 from January 13, 2012 to May 13, 2012 at 5 43% . Term: 121 Days Interest: $165.84 3. Calculate the term and the interest for a loan of $5000 from December 2, 2010 to March 17, 2011 at 15 21% . Term: 105 Days Interest: $222.95

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Winter 2018 J.Gregorio 4. Mary borrowed $3400 on May 3rd at a prime plus rate of 1 4 1% . The prime rate was 4% at that time. It increased to 5% effective July 1st. What amount was required to repay the loan on September 10th? Total Interest: $70.19 Total Repaid: $3470.19

Practice (from textbook Section 6.2) 4. $850 borrowed on January 7, 2014, was repaid with interest at an annual rate of 7% on July 1, 2014. What was the amount of interest? Term: 175 days Interest: $28.53

1 6. A $14,000 loan taken out on May 21, 2013, was repaid with interest at 11 4 % per annum on July 19, 2014. How much interest was paid?

Term: 424 Days Interest: $2059.40 16. $1000 was invested on April 18, 2014, in a certificate of deposit earning 7.7% per annum. On its maturity date, the certificate paid $32.28 interest. On what date did it mature? Find term: 0.419220779 years × 365 days = 153 CPT DT2: Sept 18, 2014 18. The $1000 principal amount of a loan was repaid on March 13, 2014, along with accrued interest in the amount of $49.42. If the interest rate on the loan was 11%, on what date was the loan advanced? Find term: 0.449272727 years × 365 days = 164 CPT DT1: Sept 30, 2013

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Winter 2018 J.Gregorio

Maturity Value of a Loan ● ●

The maturity value (future value, accumulated value) is the total of the original principal amount plus the interest due on the maturity date (end of the term). We will use the letter ‘S’ to represent the maturity value. Equations: S =P +I S = P (1 + rt)

Examples: 1. I invest $900 with my friend Jeff for 6 months at an interest rate of 6%. What is the maturity value of the investment? Maturity Value: $927 1 2. What amount of money would have to be invested at 5 4 % to grow to $1000 after 110 days?

Principal: $984.42

Practice (from textbook, Section 6.3) 2. $12,800 was invested in a 237-day term deposit earning 3 4 3% . What was its maturity value? Maturity Value: $13,111.67 6. The maturity value of an investment earning 7.7% per annum for a 360-day term was $2291.01. What amount was originally invested? Principal: $2129.30 10. A $2875.40 investment grew to $3000 after eight months. What annual rate of simple interest did it earn? Interest Rate: 6.5% 1 16. The interest rate on an $859.50 debt was 10 4 % . For how many months was the loan outstanding if it was settled with a payment of $907.22?

Term: 6.5 months

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