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a) Henry takes out a $650 discounted loan with a simple interest rate of 12% for

ID: 3198006 • Letter: A

Question

a) Henry takes out a $650 discounted loan with a simple interest rate of 12% for a period of 7 months. How much money does Henry receive into his bank account when the loan is drawn down? Give your answer in dollars and cents to the nearest cent.

b) For a $250,000 mortgage, with an interest rate of 6% paid over 25 years, the monthly payment is $1,610.75. After one month, what is the balance of the loan? Give your answer to the nearest dollar.

c) A financial instrument pays 8% simple interest (based on the purchase value) and lasts for 3 years. The instrument can be purchased at any price.

An investor purchases the instrument for P, and has calculated that the total value of the investment (i.e. P plus interest earned) will be $2,000 at maturity. Calculate P, giving your answer to the nearest cent.

Explanation / Answer

a) amount =650$

rate =12%

period= 7 month=7/12 years

simple interest = (p*r*t)/100=(650*12*7)/12*100=45.50

amount in the account =650+45.50=$695.50