Business Math - Answers Sample Test 3

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Answers Sample Exam Three

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Simple Interest/Consumer Credit

Part 1: Complete the table as given. Show Work in boxes at bottom of page.
(6 points each)

Prob. #	Basic Formula	Appropriate Variation	I	P	r	Time	A=P+I or A=P(1+rt)
1	I = Prt	None	$114.00	$2,400	9.5% Simple	6 months	$2,514
2	I = Prt	r =	$63.25	$825	5.11%	18 months	$888.25
3	I = Prt	P =	$24.94	$464	10.75% Simple	6 months	$488.94
4	I = Prt		$42.30	$940	6.75% Simple	.66 years year or 8 months	$982.30
5	I = Prt	None	$32.81	$1,500	8.75%	3 months	$1,532.81
6	I = Prt	None	$116.67	$7,000	5% ordinary	120 days	$7,116.67
7	I = Prt	None	$107,88	$7,000	6.25% exact	90 days	$7107.88
8	I = Prt	r =	$4.83	$322	9% ordinary	May 15 135 to 195 July14 60	$326.83
9	A=P(1+rt)	None	Do not calculate	$1,555	7.5% exact	70 days	$1,577.37
10	A=P(1+rt)	P =	Do not calculate	$438.95	10.25 Simple	8 months	$468.95

1. I = Prt I = (2400)(.095) I = 114	2. r = r = .05111 = 5.11%	3. P = P = 464	4. or 8 months
A = P + I A = 2400 + 114 A = 2514	A = P + I A = 825 + 63.25 A = 888.25	A = P + I A = 464 + 24.94 A = 488.94	A = P + I A = 940 + 42.30 A = 982.30
5. I = Prt I = (1500)(.0875) I = 32.81	6. I = Prt I = 116.67	7. I = Prt I = 107.88
A = P + I A = 1500 + 32.81 A = 1532.81	A = P + I A = 7000 + 116.67 A = 7116.67	A = P + I A = 7000 + 107.88 A = 7107.88
8. r = r = .09 = 9%	9. A = P(1+rt) A = 1577.37	10. P = P = 438.95
A = P + I A = 322 + 4.83 A = 326.83	9. A = P(1+rt) A = 1577.37	10. P = P = 438.95

Part 2: Provide solutions to the following problems (10 points each).

Problem 11: An invoice for $500 contains terms 3/15, n/45. Find the ordinary interest rate at which a person can afford to borrow in order to take advantage of the cash discount.

I = Prt or r =

= 37.11%

Problem 12: For the given invoice amount, cash discount terms and ordinary interest rate, find how much could be saved on the transaction. $800; 2/10, n/60; 8%

800
x.02
16.00   Discount

800
-16   Amount
784   Borrowed for 50 days at 8% interest

I = Prt

I = 8.71 Interest
Savings = Discount - Interest
Savings = 16.00 - 8.81 = 7.29

Problem 13: Partial payments of $500, $300, and $400 are made on a one-year loan of $2000 at 10% simple interest. If the payments are made at 3-month intervals, find the amount due at the end of the year.

First Payment
I = 2000(.10)

= 50
500 - 50 = 450
2000 - 450 = 1550

Second Payment
I = 1550(.10)

= 38.75
300 - 38.75 = 261.25
1550 - 261.25 = 1288.75

Third Payment
I = 1288.75(.10)

= 32.22
400 - 32.22 = 367.78
1288.75 - 367.78 = 920.97

Final Payment
I = 920.97(.10)

= 23.02
920.97 + 23.02 = 943.99

Problem 14: Calculate the finance charge (FC) as the average daily balance (ADB) at a 1.75% per month interest rate for the credit card account with the monthly activity as defined by the following table.

Date	Days	Transaction	Balance	Days x Balance
4/15	5	Beginning of Billing Cycle	$316.40	5*316.40 = 1582
4/20	2	Payment $150.00 CR	166.40	2*166.40 = 332.80
4/22	6	Return $27.16 CR	139.24	6*139.24 = 835.44
4/28	2	Cash Advance $50.00	189.24	2*189.24 = 378.48
4/30	15	Purchase $65.00	254.24	15*254.24 = 3813.60
5/15		Close of Billing Cycle		6942.31

Average Daily Balance = = 231.41

Finance Charge = 231.41 * .0175 = 4.05