Interest and Loan Concepts Assignment (Total 40 Points) Question 2: (10 Points)

Question

Interest and Loan Concepts Assignment (Total 40 Points)

Question 2: (10 Points)

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

Exact time (days) of loan: __________

Using ordinary interest, calculate the interest and total owed.

Using exact interest, calculate the interest and total owed.

Question 3: (10 Points)

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

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

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 $10,000 after 45 days?

Question 4: (10 Points)

Find the bank discount and proceeds using ordinary interest on an unsecured promissory note made to Leslie Smith for $12,000 at 7% annual simple interest from June 15 to September 15 for this year. Use the steps below to find your answers.

Explain the difference between a simple interest note and a simple discount note.

Exact time (days) of note: __________

What is the bank discount?

What are the proceeds that Leslie Smith receives?

What is the amount Leslie Smith repays?

Explanation / Answer

Question 2: Lets Say The Loan date be 1st january Exact time (days) of loan: ____365_Days_____ Using ordinary interest & exact interest will make same sense here Interest = 6000*7%*365/365 = $420 Total Owed = 6000 Question 3: Loan = 30000 Rate = 4% No Of days= 90 If Repayment of $ 10000 on loan then New Principle = 30000 - ( 10000/1.005) = 20049.75 Amount be paid at the end of over all = 30000(1+4%*90/365) = 30295.85 Total loan repaid including paid in between = 20049.75*(1.1) + 10000 = 32054 Question 4: In case of Simple interest note, Discount is calculated by using formula Note amount * rate of interest * time/365 In case of Simple Discount note, Discount is calculated by using formula Note amount * Discount rate of interest Exact Time days of Note = 16+31+31+15 = 93 days Bank discount = 12000*7% *93/365 = $214.02 Proceeds That Lessie Smith Receives = 12000-214 = $ 11786 Leslie Smith Repays = $ 12000

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