Interest and Loan Concepts

You must showyour work at all times. The steps for solving each problem must be explained.

Type all answers directly in this Assignmentbelow each question.

Interest and Loan Concepts Assignment (Total 40 Points)

Question 1: (10Points)

a) State the simple interestformula and explain how simple interest is calculated.

b) Calculate the simpleinterest for a loan for $39,545 for 3 1/2 years at 7.5% interest per year.Round to the nearest cent.

c) How much is owed in totalat the maturity date?

Question 2: (10Points)

You decide totake out a loan for $6,000, at 7% yearly interest on the date that Unit 4starts. If you repay the loan on December 31st (at the end of the currentyear).

a) Exact time (days) of loan: __________

b) Using ordinary interest, calculate the interestand total owed.

c) Using exact interest, calculate the interest andtotal owed.

Question 3: (10Points)

You decide totake out an ordinary interest loan of $30,000 at 4%, on a 90 day note.

a) In 45 days you decide to make a payment of$10,000 on the loan. What is your new principal? Explain how you got theanswer.

b) How much did you pay at the end of the loanoverall? How does this differ from how much you would have paid overall had younot made a payment of $10,000 after 45 days?

Question 4: (10 Points)

Find the bankdiscount and proceeds using ordinary interest on an unsecuredpromissory note made to Leslie Smith for $12,000 at 7% annual simpleinterest from June 15 to September 15 for this year. Use the stepsbelow to find your answers.

a) Explain the difference between a simple interestnote and a simple discount note.

b) Exact time (days) of note: __________

c) What is the bank discount?

d) What are the proceeds that Leslie Smithreceives?

e) What is the amount Leslie Smith repays?