EXERCISES 1.7 1. Complete the table. P 3,500 5,735 75,250 2. Complete the table. P 7,540 991 13,121 F t (in years) d 2 6% 12,000 7 5% 26,754 5.5% 106,532 10 F t (in years) d 5 4% 2,150 3 3.5% 6,135 6% 99,161 15 3. What is the value of 3,560 after 6 months if d = 7%? 4. What was the amount invested if the value after 10 years is 25,000 at 6.5% interest in advance 5. Accumulate 5,012 for 3 years and 7 months at 4 1/8% simple discount. 6. Find the amount due on Nov 27, if the present value on May 1 was 3,950 with a discount rate of 6 7/8%. SIMPLE INTEREST 27 1.8 Comparison of Simple Interest and Simple Discount 7. Find the present value on Aug 9 if the amount on Nov 18 is 5,630 with a discount rate of 4 3/5%. 8. Discount 6,720 for 5 years and 5 months at 7 1/4% simple discount. 9. Ms. D wants to borrow 15,800 from a bank payable 3 years and 9 months. If the bank charges 9 % interest in advance, what size of a loan would Ms. D apply for? 10. Mile wants to loan 20,500 from a lending institution payable 4 years and 3 months. If the institution charges 10% interest in advance, what size of a loan would Mile apply for? EXERCISES 1.8 1. 2. Find the amount due at the end of 8 months where the present value is 8,000 A) when the simple discount rate is 9%, B) when the simple interest rate is 9%. Accumulate 8,000 at the end of 8 months A) if the simple discount rate is 5%, B) if the simple interest rate is 5%. 3. If 1,190 is the present value of 1,850 which is due at the end of 9 months, find A) the simple discount rate B) the simple interest rate. 4. If 2,500 is the accumulated value of 1,650 which is due at the end of 9 months, find A) the simple discount rate B) the simple interest rate. 5. Discount 2,080 for 8 months at A) 6% simple interest, B) 6% simple discount. 6. Find the present value of 12,000 for 3 years at A) 8% simple interest, B) 8% simple discount. 7. Suppose that 1,000 is due at the end of 6 months and that it is discounted to the present date at 8% simple discount. Find the equivalent simple interest rate which would produce the same present value at simple interest. 8. If 1,500 is due at the end of 9 months and that it is discounted to the present date at 6% simple interest. Find the equivalent simple discount rate which would produce the same present value at simple discount. 9. On March 8, Treasury bills due in 90 days were quoted at a simple discount rate 7.68%. If a bill was bought by an investor and held to its maturity date, at what rate did the investment yield simple interest? Assume F = 1,000 10. If the treasury bills in problem 9 were quoted at the discount rate 5.156%, with the same assumption, at what rate did the investment yield simple interest? EXERCISES 1.9 1. Gene sells Note 1 below to Dennis on Jan 1, Y + 1. What does Dennis pay if he is willing to pay at 7% simple interest? 2. 3. 4. NOTE 1: Three years and 9 months after Jan 1, Y, Abel promises to pay Gene or order 1,000 and accumulated interest from this date at the rate 6% simple interest. Abel will not pay Note 1 when due. What should he pay to cancel the debt on Jan 1, Y+5, if it is agreed that money is worth 7% simple interest after Oct. 1, Y+3? A 3-month promissory note for 2,000, dated Apr. 20, Y and earning simple interest at 7% is to be sold in order to raise some needed cash. Determine the proceeds of the note if it is sold on June 20, Y to yield the purchaser a 9% simple rate of return. If the note is priced on Nov 12, Y at 5.85% simple interest, find the price at which it is sold. 12,500 Oct. 27, Y Ninety days after date Shane Smith promises to pay Mei-Lei the amount of twelve thousand five hundred plus an interest at the rate 5.92% simple interest. 5. If Shane will not pay the note in problem 4 when due. What should she pay to cancel the debt on Jan 1, Y+1, if it is agreed that money is worth 7% simple interest after the due date? 6. 7. 8. 9. A note of 5,500 dated Jan 1, Y is due in 6 years and 6 months with simple interest at 5%. On July 1, Y +5 the holder of the note has it discounted by a lender who charges a simple interest of 4%. What are the proceeds? What amount of money will Mr. S accepts from the creditor on June 1, Y to settle a debt of 8,500 due on July 1, Y+5, if the discount rate is 5%? What amount will Mr. Dale accepts from his creditor on Sept 12, Y to settle a debt of 9,250 due on Aug 12, Y+3, if the discount rate is 6%? DRF Financing borrows a certain amount from ABC Bank on Sept 1, Y and signs a promissory note to pay the bank a total of 25,000 at the end of 7 years. The bank sells this note to XYZ Lending on Sept 1, Y+4. If XYZ Corporation insists on discounting the note at the discount rate 5%, what will be the payment of XYZ Lending? 10. Recalculate problem 9 if the simple interest on 25,000 is 4.5% and the bank sells the note on Sept 1,Y+6.