Question

a) A person borrows $6650.00 with interest at 15.5% compounded quarterly for 4 years 7 months. If simple interest is used for part of an interest conversion period, how much is required to pay off the debt at the end of 4 years 7 months?

b)A person invests $7500.00 at 6.75% compounded semiannually on October 1, 2018. If simple interest is allowed for part of an interest conversion period, how much is the investment worth June 1, 2022?

c) On March 2, 2020, Bob borrows $4400.00 with 14.5% compounded monthly. If simple interest is used for part of an interest conversion period, how much is required to settle the debt on July 26, 2027?

Answer 1

A)

Number of quarters in 4 years 6 months = (4 years * 4) + 2 quarters = 18 quarters

Annual interest rate = 15.5%

Quarterly interest rate = 15.5%/4 = 4% = 0.03875

Amout required to payoff the debt at the end of 4 years 6 months = $6650.00 * 1.03875¹⁸ = $13,183.1838

Simple Interest for one month = $13,183.1838* 15.5% * 1/12 = $170.2827

Amount required to payoff the debt at the end of 4 years 7 months = $13,183.1838+ $170.2827= $13,353.4665

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