8. You borrow $5,000 at a simple 15% interest rate from your friend for 18 month

Question

8.  You borrow $5,000 at a simple 15% interest rate from your friend for 18 months in order to purchase new furniture and sign on a promissory note on your borrowing. 5 months later, your friend sells the promissory note to a bank that charges a 20% discount rate (Bank discount). How much would your friend receive from the sale of the promissory note?

9. You are supposed to make three payments, $550 in 4 months, $780 in 11 months, and $300 in 20 months. If you want to discharge your debt in 15 months with a single payment and the interest rate is 9% compounded monthly, what would the single payment be?  

Explanation / Answer

8. You borrow $5,000 at a simple 15% interest rate from your friend for 18 months in order to purchase new furniture and sign on a promissory note on your borrowing. 5 months later, your friend sells the promissory note to a bank that charges a 20% discount rate (Bank discount). How much would your friend receive from the sale of the promissory note?

friend receive from the sale of the promissory note= (5000+5000*5/12 * 15 %)*80% = $4250

9. You are supposed to make three payments, $550 in 4 months, $780 in 11 months, and $300 in 20 months. If you want to discharge your debt in 15 months with a single payment and the interest rate is 9% compounded monthly, what would the single payment be?

Single Payment be = 550*(1.0075)^11 + 780*(1.0075)^4 + 300/(1.0075)^5 = $1689.78

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