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MA170wk3solns

# MA170wk3solns - MA170 Week 3 Report Simple Discount...

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MA170 Week 3 Report: Simple Discount, Equations of Value at Simple Name: SOLUTIONS Lab Student Number: Fall 2010 1. [7 marks ] A loan of \$1200 with a simple interest rate of 8% is due in 11 months. The borrower makes partial payments of \$80 in 3 months, \$35 in 8 months and \$150 in 9 months. Determine that balance that must be paid on the due date using (a) Method 1 (Declining Balance Method) Interest after 3 months: 1200 & 0 : 08 3 12 ±± : = 24 < 80 ) the balance after 3 months is 1200 + 24 80 = \$1144 Interest earned between months 3 and 8 : 1144 (0 : 08) 5 12 ± : = 38 : 13 > 35 payment will be held until the next payment Interest owed at month 9 : (interest accrued between months 3 and 9) 1144 & 0 : 08 5 + 1 12 ±± = 45 : 76 < 150 + 35 ) the balance at 9 months is 1144 + 45 : 76 150 35 = \$1004 : 76 Balance at due date : 1004 : 76 1 + 0 : 08 2 12 ±± = \$1018 : 16 (b) Method 2 (Merchant’s Rule) Accumulated value of the debt at eleven months: 1200

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MA170wk3solns - MA170 Week 3 Report Simple Discount...

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