Unit 3 focuses on interest and loan concepts covered in your reading of Chapter 11: “Simple Interest and Simple Discounts.”
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Assignments must be submitted as a Microsoft® Word® document and uploaded to the Dropbox for Unit 3. Type all answers directly in this Assignment below each question.
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Interest and Loan Concepts Assignment (Total 40 Points)
Question 1: (10 Points)
a) State the simple interest formula and explain how simple interest is calculated.
b) Calculate the simple interest for a loan for $39,545 for 3 1/2 years at 7.5% interest per year. Round to the nearest cent.
c) How much is owed in total at the maturity date?
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).
a) Exact time (days) of loan: __________
b) Using ordinary interest, calculate the interest and total owed.
c) 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.
a) 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.
b) 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.
a) Explain the difference between a simple interest note and a simple discount note.
b) Exact time (days) of note: __________
c) What is the bank discount?
d) What are the proceeds that Leslie Smith receives?
e) What is the amount Leslie Smith repays?
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