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Unformatted text preview: B07.10 Vinay Sanja was interviewing for a job at the State Bank of India. The bank requires all job
applicants to take a competency test on basic money mathematics. Vinay has completed
the interest calculations portion of the exam. Below are his questions and answers. Vinay
must correctly answer in at least 3 cases to be eligible for the job. Evaluate and correct
Vinay's answers. Does he qualify for the job?
(a) Assume the bank holds a 400,000 Indian Rupee (INR) note receivable dated
June 1, 20X1. This note matures on August 31, 20X1. This note is written
to assume a 360 day year and 30 day months. The annual interest rate is
stated at 10%. What is the maturity value of the note, including interest? Answer: 400,000 X 10% X 60/360 =
6,666.67
400,000 + 6,666.67 = 406,666.67
(b) Assume the bank holds a INR 400,000 note receivable dated June 1, 20X1.
This note matures on August 31, 20X1. This note is written to assume a
365 day year and actual days outstanding are used in all calculations. The
annual interest rate is stated at 10%. What is the maturity value of the note,
including interest? Answer: 400,000 X 10% X 92/365 =
10,082.19
(c) Assume the bank holds a INR 1,000,000 note receivable dated October 1,
20X5. This note matures on September 30, 20X6. This note is written to
assume a 360 day year and 30 day months. The annual interest rate is
stated at 8%. How much interest income should the bank record for its
accounting year ending December 31, 20X5? Answer: Zero, the note is not due until
20X6 1 of 2 B07.10 (d) Assume the bank holds a INR 1,000,000 note receivable dated October 1,
20X5. This note matures on September 30, 20X6. This note is written to
assume a 360 day year and 30 day months. The annual interest rate is
stated at 8%. How much interest income should the bank record for its
accounting year ending December 31, 20X6? Answer: 1,000,000 X 8% X 270/360 =
600,000 2 of 2 ...
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 Spring '11
 hudack
 Accounting

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