Question

If you can earn 6.5% in simple interest on an investment of $15,000, how much will you have in seven years?

Suppose you borrow $35,000 and you are going to make annual payments of $3,000 for nine years. What interest rate are you paying on the loan?

Another bank will let you borrow the $20,000 for your new car. You can still borrow at 7% per year. If you take the 3-year loan, what are your monthly payment?

Answer 1

1)	Future value (simple interest)
	A = P + P*N*R
	P = present value
	N = number of periods
	R = interest per period
	=$15000+ 15000*6.5%*7
	=$15000+6825
	=21825
2)	Present Value Of An Annuity
	= C*[1-(1+i)^-n]/i]
	Where,
	C= Cash Flow per period
	i = interest rate per period
	n=number of period
	$35000= $3000[ 1-(1+i)^-9 /i]
	i= -4.90%
2)	EMI = [P x R x (1+R)^N]/[(1+R)^N-1]
	Where,
	EMI= Equal Monthly Payment
	P= Loan Amount
	R= Interest rate per period
	N= Number of periods
	= [ $20000x0.005833333 x (1+0.005833333)^36]/[(1+0.005833333)^36 -1]
	= [ $116.66666( 1.005833333 )^36] / [(1.005833333 )^36 -1
	=$617.54