Haywood Corporation borrows $10,000 for 3 years at a simple interest rate of 8%

Question

Haywood Corporation borrows $10,000 for 3 years at a simple interest rate of 8% per year. Compute the total interest to be paid for the 3 years. On October 1, 2012, Haywood Corporation borrows $10,000 for 3 months at a simple interest rate of 8% per year. Compute the total interest to be paid for the year ended Dec. 31, 2012. Winston Company wants to determine the future value of $50,000 invested for 5 years compounded annually at an interest rate of 11%. Compute this amount. You need $25,000 in 4 years to start a business. What amount must you invest today if your investment earns 12% compounded quarterly? Dunston Company will receive $200,000 in a future year. If the future receipt is discounted at an interest rate of 10%, its present value is $102,632. In how many years the $200,000 received?

Explanation / Answer

21- Simple interest= (principle* interest rate * period)/100=(10000*8*3)/100=2400

22-Simple interest=(10000*8*(3/12))/100=200

23-Amount=Principle*(1+r)^t=50000*(1+0.11)^5=84252.91

24-1 year= 4 quarters =>4 years=16 quarters

Annual interest rate=12% hence quarterly rate=12%/4=3%

25000=principle*(1+(0.12/4))^16

hence principle required=15579.17

25- PV=CF/(1+r)^t

102632=200000/(1.10^t)

hence t=7 years

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