Chapter 01
Simple Interest and Simple Discount
Multiple Choice Questions
1. You invest $800 on May 25, 2007, on what day will you have earned exactly $31.96 of
interest if your investment earns simple interest at r = 6%?
A. August 31, 2007
B. January 20, 2008
C. January 23, 2008
D. January 25, 2008
t = I/P r = 31.96/(800)(0.06) = 0.66583333; Number of days = 365(0.66583333) = 243 and
243 days after May 25 is January 23.
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Difficulty: Easy
Section: 01-01
,2. You invest $50,000 today. It earns simple interest at 15% for the first 5 months, 10% for
the next 3 months and 12% for the last 2 months. What is the accumulated value at the end
of 10 months?
A. $56,450
B. $56,250
C. $55,542
D. $55,375
S = 50,000 + 50,000(0.15)(5/12) + 50,000(0.10)(3/12) + 50,000(0.12)(2/12) = $55,375
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Difficulty: Medium
Section: 01-01
,3. You buy a stove for $1500 on February 20. The store gives you 4 months "interest free",
after which you must pay the $1500. However, the store charges an administration fee of
$50, to be paid today. What rate of simple interest, r, are you being charged for this "interest
free" plan?
A. 10.49%
B. 10.34%
C. 10.14%
D. 10.00%
$50 paid today along with $1500 in 4 months (June 20, which is 120 days later) is
equivalent to paying $1500 today. We need to solve the following equation for r (focal date
time 0):
50[1 + r (120/365)] + 1500 = 1500[1 + r(120/365)] ® r = 10.49%
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Difficulty: Hard
Section: 01-01
4. You buy some furniture for $600. The department store offers you "no interest for 8
months" after which you can pay the $600 in one lump sum. To take advantage of this deal,
the store charges a $25 service fee, which is to be paid today. What rate of simple interest is
the store charging you for this "no interest" loan?
A. 0%
B. 5.80%
C. 6.05%
D. 6.52%
$25 paid today along with $600 in 8 months is equivalent to paying $600 today. We need to
solve the following equation for r (focal date time 0):
25[1 + r (8/12)] + 600 = 600[1 + r(8/12)] ® r = 6.52%
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Difficulty: Hard
Section: 01-01
,
Simple Interest and Simple Discount
Multiple Choice Questions
1. You invest $800 on May 25, 2007, on what day will you have earned exactly $31.96 of
interest if your investment earns simple interest at r = 6%?
A. August 31, 2007
B. January 20, 2008
C. January 23, 2008
D. January 25, 2008
t = I/P r = 31.96/(800)(0.06) = 0.66583333; Number of days = 365(0.66583333) = 243 and
243 days after May 25 is January 23.
Accessibility: Keyboard Navigation
Difficulty: Easy
Section: 01-01
,2. You invest $50,000 today. It earns simple interest at 15% for the first 5 months, 10% for
the next 3 months and 12% for the last 2 months. What is the accumulated value at the end
of 10 months?
A. $56,450
B. $56,250
C. $55,542
D. $55,375
S = 50,000 + 50,000(0.15)(5/12) + 50,000(0.10)(3/12) + 50,000(0.12)(2/12) = $55,375
Accessibility: Keyboard Navigation
Difficulty: Medium
Section: 01-01
,3. You buy a stove for $1500 on February 20. The store gives you 4 months "interest free",
after which you must pay the $1500. However, the store charges an administration fee of
$50, to be paid today. What rate of simple interest, r, are you being charged for this "interest
free" plan?
A. 10.49%
B. 10.34%
C. 10.14%
D. 10.00%
$50 paid today along with $1500 in 4 months (June 20, which is 120 days later) is
equivalent to paying $1500 today. We need to solve the following equation for r (focal date
time 0):
50[1 + r (120/365)] + 1500 = 1500[1 + r(120/365)] ® r = 10.49%
Accessibility: Keyboard Navigation
Difficulty: Hard
Section: 01-01
4. You buy some furniture for $600. The department store offers you "no interest for 8
months" after which you can pay the $600 in one lump sum. To take advantage of this deal,
the store charges a $25 service fee, which is to be paid today. What rate of simple interest is
the store charging you for this "no interest" loan?
A. 0%
B. 5.80%
C. 6.05%
D. 6.52%
$25 paid today along with $600 in 8 months is equivalent to paying $600 today. We need to
solve the following equation for r (focal date time 0):
25[1 + r (8/12)] + 600 = 600[1 + r(8/12)] ® r = 6.52%
Accessibility: Keyboard Navigation
Difficulty: Hard
Section: 01-01
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