Question

1.Next summer you are planning a trip to Ibiza that will set you back roughly $4100. You have decided to put money aside starting November 30^th 2012, with additional, equal payments on February 28^th 2013 and May 31^st 2013. You wish to have the total sum of the required money for July 31^st 2013. Assuming that only the three equal payments are made, how large should the payments be if you earn a simple interest rate of 5%?

2. 5 months ago, Kevin borrowed a total of $1500 from Angela. They agreed to split the loan into amounts of $600 and $900, to be paid 6 and 11 months from the date of the agreement, respectively. On both of these payments, Kevin agreed to pay interest on each of the principle amounts at the rate of 12%.

Kevin now wishes to repay the loan in one single payment, 5 months from now. If money can now earn 7% rate of return, what single payment should Kevin require?

Timeline Hint:

5 months ago Today 1 months from now 5 months from now 6 months from now

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3. A payment stream consisting of $1812 due (but not paid) 11 months ago, and $3747 due in 9 months is to be replaced with the following equivalent set of payments: an unknown payment due today, and a payment of $1684 due in 17 months. What is the amount of the payment due today if the rate of simple interest is 3.82%? Give your answer rounded to the nearest cent and use today as the focal date.

4.A debt of $1410 was due 108 days ago and one of $1916 is due in 265 days. A credit advisor decides you should settle the debts with two equal payments: the first payment is to be made today and the second in 449 days from today. Find the size of the equal payments if interest is 5.3% per annum. Use today as your focal date, and give your answer rounded to the nearest cent.

Answer 1

1.

Date Page Ans let Interest sum n be the rate = 5%. of payment Principal & Interest of amount deposited in 30th Nov, 2012 Prinupal & Interest n tnx 100 12 ut You 12oo Principal & Interest n+ nx5 amount deposited in 28th Feb, 2013 100 12 - R+ 25n 1200 Principal amount deposited in 31 st May, 2013 & Interest nt ух ST 100 x 2 12 - at lon 1200 Equation will be : nt You + xt 25n + nt lon 41 op 1200 1200 1200 1+ 40 7200 +1+25 tit 10 1200 400 1200 N 3 + 10 25 1200 1200 = 4100 ] 1200

classmate Date Page 3600 + 40 + 25 + 10 2] 4100 1200 w X 3675 4100 1200 M 4100 X 1200 3675 n $ 1338 .78 CApprox) be three equal payments of There should $ 1338.78 31st July to set aside 2013

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