MM 255 MM255 UNIT 3 ASSIGNMENT INTEREST AND LOAN CONCEPTS - KAPLAN
Kaplan MM255 Unit 3 Assignment Interest and Loan Concepts
Question 1: (10 Points)
a) State the simple interest formula and explain how simple interest is calculated.
b) Calculate the simple interest for a loan for $37,950, for 3 1/6 years at 2.8% interest per year. Round to the nearest cent.
c) How much is owed in total at the maturity date?
Question 2: (10 Points)
You decide to take out a loan for $23,860, at 3.85% yearly interest, on the date May 18. You will repay the loan on December 31st (at the end of that year).
a) Exact time (days) of loan: _227 days_ I found this by looking at (Chart 11-1) Sequential Numbers for dates of the year. I subtracted 365 (Dec 31st) by 138 (May 18th).
b) Using ordinary interest, calculate the interest and total owed.
c) Using exact interest, calculate the interest and total owed.
Question 3: (10 Points)
You decide to take out an ordinary interest loan of $8,375 at 7.4%, on a 90-day note.
a) In 45 days, you decide to make a payment of $4,375 on the loan. What is your new principal? Explain how you got the answer.
b) How much did you pay at the end of the loan, overall? How does this differ from how much you would have paid, overall, had you not made a payment of $4,375 after 45 days?
Question 4: (10 Points)
Find the bank discount and proceeds using ordinary interest on an unsecured promissory note made to Kari Williams for $22,000 at 3.8% annual simple interest from April 19 to September 21 for this year. Use the steps below to find your answers.
a) Explain the difference between a simple interest note and a simple discount note.
b) Exact time (days) of note:
c) What is the bank discount?
d) What are the proceeds Kari receives?
e) What is the amount Kari repays?
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