Question

*1.2.18 Smith receives a paycheck of 3500 on the last day of each month, and immediately deposits all but 1000 of it in a bank account. The first deposit is on December 31, 2017. Smith deposits an addition- al 1000 on the 15ª of every month. The account pays an annual in- terest rate of 10%. Find the balance in the account on March 31. 2018, after the deposit is made and interest is credited, in each of the following cases. (a) Simple interest based on minimum monthly balance and cred- ited on the last day of March (no interest deposited into the account in January or February) vunuas y) (c) Same as (a) but with interest credited on the last day of every month

Answer 1

Ans a) It can be solved using Excel as mentioned below

Date	Deposit Amount	No. of days on 31/03/2019	Interest on 31/03/2019	Interest rate per day
31/12/2017	1000	90	24.66	0.00027397
15/01/2018	1000	75	20.55
31/01/2018	1000	60	16.44
15/02/2018	1000	45	12.33
28/02/2018	1000	31	8.49
15/032018	1000	15	4.11
31/08/2018	1000	0	0.00
	7000		86.58

Where:

• No. of days on 31/03/2018 are taken as Interest earning days from the date of deposit
• Interest rate per day is calculated as 10%/365 Assuming 365 days in a year
• Interest is calculated by multiplying = No. of interest earning days X Interest rate per day X Amount deposited.

Balance in the account on 31/03/2018 = Total Principle deposited + Total Interest earned

Balance in the account on 31/03/2018 = 7000+86.58 = 7086.58

Ans. c If interest get credited every month

Date	Deposit Amount	No. of days at the end of every month	Interest at the end of every month	Interest rate per day
31/12/2017	1000	31	8.49	0.00027397
15/01/2018	1000	16	4.38
31/01/2018	1000	0	0.00
Total	3000		12.88	3012.88	Closing Bal
Opening Bal 01/02/2018	3012.88	28	23.11
15/02/2018	1000	13	3.56
28/02/2018	1000	0	0.00
Total	5012.88		26.67	5039.55	Closing Bal
Opening Bal 01/03/2018	5039.55	31	42.80
15/032018	1000	15	4.11
31/08/2018	1000	0	0.00
	7039.55		46.91	7086.46	Closing Bal.

If interest get credited last day of every month the closing balance on 31/03/2018 will be 7086.46