1. How much simple interest ill be aned in 3 years with an initial depostk of $1
ID: 2616570 • Letter: 1
Question
1. How much simple interest ill be aned in 3 years with an initial depostk of $100 rate of 5%? 2. Suppose you want to save $3500. and you put $3000 in the bank at 10% simple interest. How long must you wait 3. Find th e future value and the interest irs 1000 is invested for 5 years at 4% a. Compounded annually b. Compounded semiannually d. Compounded daily You want to purchase a laptop for $800 and you decide to pay for it with installments of each monthly payment? 4. over 2 years. The store tells you that the simple interest rate is 15%. What is the amount A car sell for $12,000. The car is also offered at 20% down and 36 monthly payments of $400, find: a. Amount of down payment b. Amount financed c. The finance charge d. APR (rounded to the nearest tenth percent) 5. +43.33Explanation / Answer
1) Simple interest = P*r*n, where P = the initial deposit, r = the interest rate per year and n = number of years. = 1000*5%*3 = $ 150.00 2) If $3500 is to be accumulated, the total simple interest to be earned = 3500 - 3000 = $500. Therefore, using the above equation for total simple interest we have 500 = 3000*10%*n Solving for n, the number of years n = 500/(3000*10%) = 1.67 Years 3) a) FV = 1000*1.04^5 = $ 1,216.65 The formula to be used for (b) to (d) is FV = PV*(1+r/m)^(m*n) where, m = number of times compounding is done in a year, n= number of years and r = rate of interest. b) FV = 1000*1.02^10 = $ 1,218.99 c) FV = 1000*1.01^20 = $ 1,220.19 d) FV = 1000*(1+0.04/365)^(5*365) = $ 1,221.39 4) Monthly payment = (800+800*15%*2)/(2*12) = $ 43.33 5) a) Amount of down payment = 12000*20% = $ 2,400.00 b) Amount financed = 12000 - 2400 = $ 9,600.00 c) The finance charge = 400*36-9600 = $ 4,800.00 d) 9600 is the PV of the annuity of 400 for 36 months Hence, using the formula for PV of annuity, we have 9600 = 400*PVIFA(r,36), where r = the monthly interest. Further, 24 = PVIFA(r,36) PVIFA for 2% = 24.9986 and for 3% is 21.4872 r lies between 2% and 3% The value of r can be found out by simple interpolation as below: r = 2+(24.9986-24.00)/(24.9986-21.4872) = 2.284388 APR = 2.284388*12 = 27.41%
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.