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1. A man has a loan of 50,000 in a bank that gives an interest rate of 12% compounded quarterly? If he plans to pay after 6months, how much is the interest?

2. A man has a loan of 50,000 in a bank that gives an interest rate of 12% compounded quarterly? If he plans to pay after 6months, what is n?

3. A man has a loan of 50,000 in a bank that gives 12% simple interest. If he plans to pay after 6months, what is r (in decimal form)?

4. A man has a loan of 50,000 in a bank that gives an interest rate of 12% compounded quarterly. How much will he pay quarterly for 5 years if he start paying on the day of his loan?

5. A man has a loan of 50,000 in a bank that gives 12% simple interest. How much is the interest if he plans to pay after 5 years?

Answer 1

1.

Principal = 50,000

rate = 12%/4 = 3%

n = 0.5 x 4 = 2

installment = PMT (RATE , NPER,PV, FV)

installment = PMT (3% ,2, 50000 , 0)

installment = 26,130

TOTAL INTEREST PAYMENT = NO. OF PAYMENTS x INSTALLMENT - PRINCIPAL

= 2 x 26,130 - 50,000

= 2260

2.

N = period of loan in years x frequency of loan payment (quarterly)

= 0.5 x 4

= 2

3.

rate of interst (r) = (rate of interest / no. of months in a year) x time taken to repay the loan

= (12%/12) x 6

= 6%

4.

Using excel

installment = PMT (RATE , NPER,PV, FV)

RATE = 12%/4 = 3%

NPER = 5 x 4 = 20

PV = 50,000

FV = 0

installment = PMT (3%,20,50000,0)

QUARTERLY INSTALLMENT = 3262.9

5. SIMPLE INTEREST = P x R x T

PRINCIPAL (P) = 50,000

R = 12%

T = 5

SIMPLE INTEREST = P x R x T

= 50,000 x 12% x 5

SIMPLE INTEREST = 30,000