Question 1

What amount on January 23 is equivalent to $1,000 on the preceding August 18 if money can earn 6.5%?

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Question 2

A payment stream consists of three payments: $1000 today, $1500 in 70 days, and $2000 in 210 days. What single payment, 60 days from now, is economically equivalent to the payment stream if money can be invested at a rate of 8.5%?

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Question 3

At what rate can money be invested if $2370.00 is equivalent to $2508.79 paid 190 days later?

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Question 4

A $3000 loan at 5% was made on March 1. Two payments of $1000 each were made on May 1 and June 1. What payment on July 1 will pay off the loan?

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Question 5

How do you determine the economic value on a particular date of a series of payments?

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Question 6

Calculate the combined equivalent value today of $500 due today and $300 due in three months. Assume that money can earn 95%.

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Question 7

How can you determine whether two payment streams are equivalent to each other?

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Question 8

Nicholas can purchase the same furniture from Store A for $2,495 cash or from Store B for $2,560 with nothing down and no payments or interest for 8 months. Which option should Nicholas choose if he can pay for the furniture by cashing in Canada Savings Bonds currently earning 3.9% per annum?

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Question 9

Calculate the combined equivalent value in five months from now of a payment stream consisting of $1000 payable today and $1500 payable in five months? Assume money can earn 5.5%.

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Question 10

Avril owes Value Furniture $1,600, which is scheduled to be paid on August 15. Avril has surplus funds on June 15 and will settle the debt early if Value Furniture will make an adjustment reflecting the current short-term interest rate of 3.25%. What amount should be acceptable to both parties?

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Question 11

Payments of $900 and $1000 are due in 30 days and 210 days respectively. If money can be invested at 7.75% what single payment 90 days from now is equivalent to that payment stream?

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Question 12

Two equal payments, 50 days and 150 days after the date of the loan, paid off a $3000 loan at 8.25%. What was the amount of each payment?

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Question 13

Two payments of $1,300 and $1,800 were scheduled to be paid five months ago and three months from now, respectively. The $1,300 payment has not yet been made. What single payment at a focal date one month from now would be equivalent to the two scheduled payments if money can earn 4.5 %?

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Question 14

Payments of $850 and $1,140 were scheduled to be paid today and nine months from now, respectively. What total payment today would place the payee in the same financial position as the scheduled payments? Money can earn 8.25%.

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Question 15

A late payment of $850.26 was considered equivalent to the originally scheduled payment of $830.00, allowing for interest at 9.9%. How many days late was the payment?

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Question 16

During its 50-50 Sale, Marpole Furniture will sell its merchandise for 50% down, with the balance payable in six months. No interest is charged for the first six months. What 100% cash price should Marpole accept on a $1,845 chesterfield and chair set if Marpole can earn a rate of return of 2.75% on its funds?

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Question 17

We frequently hear a news item that goes something like: "Joe Superstar signed a 5-year deal worth $25 million. Under the contract he will be paid $3 million, $4 million, $5 million, $6 million and $7 million in successive years." In what respect is the statement incorrect? How should the value of the contract be calculated?

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Question 18

What annual rate of return would money have to earn for $1975.00 to be equivalent to $1936.53 paid 100 days earlier?

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Question 19

A $1000 loan at 3% was repaid by two equal payments made 30 days and 60 days after the date of the loan. Determine the amount of each payment.

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Question 20

Sheldrick Contracting owes Western Equipment $60,000 payable on June 14. In late April, Sheldrick has surplus cash and wants to settle its debt. If Western can earn 3.6% on its money, how much should Western accept on April 29?

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Quiz 6: Simple Interest