Question 1

Today is March 25^th. Snow tires that you need are available today at a sale price of $89.95 each. If you wait until October 1 to buy the tires, you will pay the full price of $107.50 each. If you buy the tires today, you will need to borrow money at 12% per annum simple interest. Should you buy the tires today or wait until October 1. Explain.

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Question 2

Mario borrowed $6,000 on March 1 at a variable rate of interest. The interest rate began at 7.5%, increased to 8% effective April 17, and then fell by 0.25% effective June 30. How much interest will be owed on the August 1 repayment date?

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Question 3

How much will be required on February 1 to pay off a $3,000 loan advanced on the previous September 30 if the variable interest rate began the interval at 10.7%, rose to 11.2% effective November 2, and then dropped back to 11% effective January 1?

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Question 4

The total accrued interest owed as of August 31 on a loan advanced the preceding June 3 was $169.66. If the variable interest rate started at 8.75%, rose to 9% effective July 1, and increased another 0.5% effective July 31, what was the principal amount of the loan?

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Question 5

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

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Question 6

What amount received on January 13 is equivalent to $1,000 received on the preceding August 12 if money can earn 5.5%?

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Question 7

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 8

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 9

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 10

Sumer put $10,000 in a 3-month term deposit at TD Canada Trust, earning a simple interest rate of 3.9% pa. After the 3 months, she invested the entire amount of the principal and interest from the first term deposit in a new 3-month term deposit earning the same rate of interest. How much interest did she earn on each term deposit? Why are the two interest amounts not equal?

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Question 11

What amount, seven months from now, is equivalent to $1215 today if money can be invested to earn 4.5%?

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Question 12

Rasheed wishes to postpone for 90 days the payment of $450 that he owes to Roxanne. If money now earns 4.75%, what amount can he reasonably expect to pay at the later date?

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Question 13

Patrick is scheduled to receive $1480 in 60 days from now. How much should he accept today as an equivalent payment if his money can earn 6.75%?

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Question 14

The annual $3,600 membership fee at the Oak Meadows Golf Club is due at the beginning of the year. Instead of a single "lump" payment, a member can pay $1,600 at the start of the year and defer the $2,000 balance for five months by paying a $75 surcharge at the time of the second payment. Effectively, what annual rate of simple interest is Oak Meadows charging on the $2,000 deferred payment?

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Question 15

Sergon has $5,000 to invest for six months. The rates offered on three-month and six-month term deposits at his bank are 3.5%3.8%, respectively. He is trying to choose between the six-month term deposit and two consecutive three-month term deposits. What would the simple interest rate on three-month term deposits have to be, three months from now, for Sergon to end up in the same financial position with either alternative? Assume that he would place both the principal and interest from the first three-month term deposit in the second three-month term deposit.

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Question 16

What payment, 174 days from now, is equivalent to $5230 paid today? Assume that money is worth 5.25% per annum.

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Question 17

A&B Appliances sells a washer-dryer combination for $1535 cash. C&D Appliances offers the same combination for $1,595 with no payments and no interest for 6 months. Therefore, you can pay $1,535 now or invest the $1535 for 6 months and then pay $1,595. What value would the annual rate of return have to exceed for the second alternative to be your advantage?

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Question 18

What is meant by "equivalent payments"?

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Question 19

Evelyn put $15,000 into a 90-day term deposit at Laurentian Bank paying a simple interest rate of 3.2%. When the term deposit matured, she invested the entire amount of the principal and interest from the first term deposit into a new 90-day term deposit earning the same rate of interest. What total amount of interest did she earn on both term deposits?

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Question 20

What amount of money paid today is equivalent to $560 paid five months from now if money can earn 1.75% per annum?

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Quiz 6: Simple Interest