Jacksonville Technical College received $3,445,553 in state
aid on September 15 for the fall academic semester. The vice-president for
finance decided to invest $2,000,000 in a 2-month investment that pays 11.5%
simple interest. How much interest will the college earn on the investment? (15
points)
2. Barney Casey borrowed $40,000 from his parents for 2
years. He paid them a total of $45,000 at the end of the 2-year term of the
simple interest loan. What rate of interest did he pay his parents? (15 points)
3. Sarai Sherman agreed to deposit $4,450 in an account
paying 16% simple interest per year for 60 days. If she made the deposit on
February 25, determine (a) the date of the end of the term of the investment,
and (b) the ordinary interest Sarai will earn. (15 points)
4. Anna Cavanaugh loaned her friend Jason $1,000 for 6
months at 6% simple interest. What is the future value of the loan and how much
finance charge will Jason pay? (15 points)
5. Acton can choose from two loan offers: $12,000 at 8%
simple interest for 9 months; or a $12,000 9-month discounted loan at 7%
discount. Based on the actual interest paid and the true rate on the discounted
loan, which of the two loan offers will Acton choose? Explain your answer. (40
points)
6. Envision that you have served as business manager of
Media World for over 2 years. You have noticed that for the last 12 months the
business has regularly had cash assets of $20,000 or more at the end of each
month. You have found a 6-month certificate of deposit that pays 6% compounded
monthly. To obtain this rate of interest, you must invest a minimum of $2,000.
You have also found a high interest savings account that pays 3% compounded
daily. Based on the cash position of the business at this time, assume that you
decide to invest $4,000.
1. Assume that you will invest the full amount in a
certificate of deposit.
a. What would be the future value of the CD at the end of
the investment term? (14 points)
b. How much interest would the investment earn for the
period? (14 points)
c. What would be the effective rate of the investment?(14
points)
2. Assume that you decide to invest the $4,000 in the
high-interest savings account.
a. What future value would you expect to receive at the end
of 6 months? (14 points)
b. How much interest would the investment earn for the
period? (14 points)
c. What would be the effective rate of the investment? (14
points)
