HW2_Financial_Mathematics_-_Part_1_Solution_Manual-1

# HW2_Financial_Mathematics_-_Part_1_Solution_Manual-1 -...

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SILABO – GERENCIA EMPRESARIAL Universidad Iberoamericana UNIBE Due Date : February 12 2011 Deliver hard copy at the beginning of class. Note: In all the problems set, even though those who involve multiple choices questions, the student must provide a clear mathematical argument for the response. Otherwise a partial credit will be given for correct answers. HOMEWORK 2: Solution Manual 1. Logan borrowed \$24,318.79 and will have to repay a total of \$27,174.25. How much interest will he pay? \$2855.46 2. Hannah borrowed \$4,200 from Fifth National Bank, agreeing to pay \$400 in interest for this loan. How much will she pay in total? \$4600 3. Jonas is borrowing \$249.76 from Katrina for 1 year, and has agreed to pay \$35.50 in interest. How much will Katrina receive when he pays her back? \$285.26 Page  1  of  8 FINANCIAL MATHEMATICS HOMEWORK 2: PART 1

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4. Haley has agreed to loan Taylor \$85,529.68 and Taylor has agreed to pay \$7,261.13 in interest. How much in total will Taylor have to give Haley when she repays the loan? \$92,790.81 In each of the following situations, identify (a) the principal, (b) the term, (c) the creditor, and (d) the debtor. 5. Jin’s parents loaned her \$2,500. She promised to pay them back \$2,750 in 2 years. a) \$2500, b) 2 years, c) Jin’s parents, d) Jin 6. Promethean Combustion Products borrowed \$800,000 from Venture Capital Funding Corp. Three years from now Promethean will be required to pay back a total of \$965,000. a) \$800,000, b) 3 years, c) Venture Capital, d) Promethean Combustion 7. Rewrite each of the following percent interest rates as decimals. a) 12% = 0.12 b) 15.3% = 0.153 c) 8% = 0.08 d) 4.35% = 0.0435 e) 0.75% = 0.0075 f) 125% = 1.25 g) 9 ½ % = 0.095 h) 19 ¾% = 0.1975 i) 5 5/8 % = 0.05625 j) 20 7/16 % = 0.204375 k) 7/8% = 0.00875 l) 375 1⁄8% = 3.75125 Page  2  of  8
8. The Village of West Rochester made a short-term deposit of \$476,903 in a local bank. When the village withdrew its funds, the account had grown to \$479,147. How much interest did it earn on the deposit? \$2,244 9. Levar’s Landscaping borrowed \$79,500 to finance the purchase of new equipment. The simple interest rate was 83⁄8%, and the term of the loan was 1 year. Calculate the total interest that the business will pay for this loan. \$6,658.13 10. Martina deposited \$4,257.09 in a certificate of deposit. Two years later, the value of her account had grown to\$4,503.27. How much interest did she earn? \$246.18 11. Answer the following questions a. Tom deposited \$5,000 in a 2-year certificate of deposit paying 8% simple interest. What was the value of his account at the end of the 2 years? \$5,800 b. Jerry deposited \$5,000 in a 1-year certificate deposit paying 8% simple interest. At the end of the first year, he took his money and opened up a new 1-year certificate of deposit, also paying 8% simple interest. How much was Jerry’s account worth at the end of the 2 years? \$5,832 c. Since Tom and Jerry both had the same amount of money, the same amount of time, and the same interest rate, it would seem that they should both have ended up with the same amount of money. Why didn’t they?

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