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Practice Problems - Simple Interest, Bank Discount, and Promissory Notes

This document provides practice problems related to simple interest, bank discount, and promissory notes. There are 14 problems covering topics such as calculating interest on loans using simple and ordinary interest methods, determining maturity values, effective interest rates of bank discount notes, and comparing payments made on loans with different interest terms. The problems are worked out with the answer provided for each.

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787 views1 page

Practice Problems - Simple Interest, Bank Discount, and Promissory Notes

This document provides practice problems related to simple interest, bank discount, and promissory notes. There are 14 problems covering topics such as calculating interest on loans using simple and ordinary interest methods, determining maturity values, effective interest rates of bank discount notes, and comparing payments made on loans with different interest terms. The problems are worked out with the answer provided for each.

Uploaded by

killerair
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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BUSINESS MATHEMATICS

SIMPLE INTEREST, BANK DISCOUNT, AND PROMISSORY NOTES


PRACTICE PROBLEMS

1. What are the amount of interest and the maturity value of a loan for ₱154,000, at 6.50% simple interest, for 24
months? ₱20,020.00; ₱174,020.00

2. Alison goes to the bank and borrows ₱150,000 at 9.50% for 250 days. If the bank uses the ordinary simple
interest method, how much interest will Alison have to pay? ₱9,895.83

3. Almira goes to a credit union and borrows ₱230,000 at 8% for 119 days on March 31, 2018.
a. If the credit union computes interest by the exact interest method, what is the amount of interest on the
loan? ₱5,998.90
b. If the interest is computed using the ordinary interest method, how much will Almira have to pay on
maturity? ₱236,082.22
c. When is the maturity date of the obligation? July 28, 2018

4. Alyssa obtained a loan on April 4 and had a due date of July 18. What is the number of days of the loan? 105
days

5. John Industries borrowed money at 9% interest for 125 days. If the interest charge was ₱5,600, use the ordinary
interest method to compute the amount of principal of the loan. ₱179,200.00

6. What is the rate of interest on a loan of ₱250,000 for 245 days, if the amount of interest is ₱19,600, using the
ordinary interest method? 11.52%

7. How many years will it take ₱50,000 invested at 8% simple interest to double in value? How long will it take to
double if the interest rate is increased by 12%? 12.5 years; 5 years

8. Angela signed a ₱200,000 bank discount note with the Planter’s Bank. The discount rate is 13% and the term of
the note is 11 months. What is the amount of the bank discount, and how much proceeds did Angela’s? receive?
₱23,833.33; ₱176,166.67
9. Anne wants ₱5,000 in cash. She applied for a 90-day loan from a bank that charges 16% discount. What is the
amount of the loan that Anne must apply for? ₱5,208.33

10. What is the effective interest rate of a bank discount note for ₱400,000 at a bank discount rate of 11% for a
period of 9 months? 11.99%

11. Jim signed a ₱10,000 bank discount note at a bank discount rate of 13%. If the term of the note was 125 days,
what was the effective annual rate of the note? 13.61%

12. The Lumber Company received a ₱350,000 promissory note at 10% simple interest for 6 months from a one of its
customers. After 4 months, the note was discounted at Westminster Bank at a discount rate of 14%. How much
did Lumber Company receive as proceeds from the discounted note? ₱358,925.00

13. Click Manufacturing received a ₱400,000 promissory note at 12% simple interest for 95 days. After 70 days, Click
discounted the note at the Far West Bank at a discount rate of 15%. The note was dated September 12.
a. When is the maturity date of the note? December 16
b. What is the maturity value of the note? ₱412,666.67
c. When was the noted discounted? November 21
d. How much proceeds did Click received after discounting the note? ₱408,368.06
e. How much is the gain (loss) on discounting? ₱965.27 loss

14. On July 30, AJ borrowed ₱300,000 from Jonathan and another ₱300,000 from Jake. AJ paid on September 21.
Jonathan is charging 4.50% exact simple interest while Jake is charging 4.30% ordinary simple interest. Compute
for the difference between the payments made for Jonathan and Jake. ₱61.11

maarosales11022018

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