The contract for the purchase of a $1500 fur coat requires payment in 30 days. If the bill is paid in 10 days, there will be a 4% discount. If the payment is not made in 30 days there is a $25 additional charge for each 30-day period of delinquency. a) What rate of interest can the purchaser consider his money earns if he pays the bill in 10 days? (5) b) What rate of interest is the delinquency charge? (2) c) If the purchaser is running low on funds, would it be advisable for the purchaser to borrow money from a bank that charges 5% simple interest to take advantage of the discount? [Justify your answer mathematically]. On which day should the purchaser borrow the money? (5;3) Textbook: mathematics of finance Author: May Albert E. Page 40 Question 12 A father's will leaves $30000 in a trust for his three children, aged 5,8 , and 10 , with the direction that each child should receive an equal amount at the age of 21 . If the fund earns interest at (0.03,m=2), what does each child receive upon attaining his maturity? (8) Textbook: mathematics of finance Author: May Albert E. Page 41 Question 16 The executor of an estate agrees to settle all the claims against the estate immediately at 4% effective. The obligations are as follows: a) A non-interest-bearing note for $5000 due on march 1,1954. b) A bill of $1500 which was due on June1, 1950 c) A note for $1000, drawn June 1, 1951, bearing interest at (0.04;m=2), and maturing June 1, 1957 If $7000 liquidates these debts, find the year, month and day in which the settlement is made. (Hint: use June 1, 1957 as the comparison date) The contract for the purchase of a $1500 fur coat requires payment in 30 days. If the bill is paid in 10 days, there will be a 4% discount. If the payment is not made in 30 days there is a $25 additional charge for each 30-day period of delinquency. a) What rate of interest can the purchaser consider his money earns if he pays the bill in 10 days? (5) b) What rate of interest is the delinquency charge? (2) c) If the purchaser is running low on funds, would it be advisable for the purchaser to borrow money from a bank that charges 5% simple interest to take advantage of the discount? [Justify your answer mathematically]. On which day should the purchaser borrow the money? (5;3) Textbook: mathematics of finance Author: May Albert E. Page 40 Question 12 A father's will leaves $30000 in a trust for his three children, aged 5,8 , and 10 , with the direction that each child should receive an equal amount at the age of 21 . If the fund earns interest at (0.03,m=2), what does each child receive upon attaining his maturity? (8) Textbook: mathematics of finance Author: May Albert E. Page 41 Question 16 The executor of an estate agrees to settle all the claims against the estate immediately at 4% effective. The obligations are as follows: a) A non-interest-bearing note for $5000 due on march 1,1954. b) A bill of $1500 which was due on June1, 1950 c) A note for $1000, drawn June 1, 1951, bearing interest at (0.04;m=2), and maturing June 1, 1957 If $7000 liquidates these debts, find the year, month and day in which the settlement is made. (Hint: use June 1, 1957 as the comparison date)