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# Park & Jason, Inc.

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1. On January 10th, Park & Jason, Inc. took out a 3-month , 8% note for \$3,000. On February 24th, they paid \$1,000 towards the debt. How much did they owe on April 10th when the note can due?

2. On June 1st, a school teacher signed a 2-month note for \$600 at 12% to pay for a vacation. On July 1st, he paid \$300 on the loan, and July 31st, he paid off the loan. What is the total interest he paid on the loan?

3. Charlie Consumer's credit card balance on April 1st was \$40. On April 7th, he made a \$10 payment and on April 25th he charged a \$25 item. If his credit card company charges a finance charge of 2% on the average daily balance, what will be his balance on May 1st when he receives his next statement?

4. Ellen Nancy borrowed \$500 at 12% simple interest, to be repaid in 8 equal monthly installments of \$70. If she pays off the loan when she makes her 4th payment, how much will she save in finance charges under the rule of 78s?

5. Which of the following investments will produce the largest interest?
a. \$100 a quarter for 5 years at 8% compounded quarterly
b. \$1,000 at 7% simple interest for 6 years
c. \$1,000 at 6% interest compounded annually for 4 years
d. \$1,000 at 6% interest compounded quarterly for 4 years

6. If an employee deposits \$20 at the end of each month into his company's plan which pays 6% interest compounded monthly, how much will he have in the account at the end of 5 years?

7. Find the present value of an annuity with payments of \$40 a quarter for 10 years, if interest rates are 12% compounded quarterly.

8. A young couple takes out a \$80,000 mortgage to buy a new condominium. They finance the loan at 7% compounded quarterly for 20 years. To the nearest \$10, how much interest will they pay over the 20-year life of the loan?

9. Megatown, USA issued 10-year bonds totaling \$2,500,000 for construction of new service roads and entrance ramps onto the freeway. The town set up a sinking fund at 12% compounded quarterly. What was the quarterly payment into this fund?

#### Solution Preview

1. On January 10th, Park & Jason, Inc. took out a 3-month, 8% note for \$3,000. On February 24th, they paid \$1,000 towards the debt. How much did they owe on April 10th when the note can due?

Interest payable from January 10 - February 23 = \$3,000 x 0.08 x 45/365 = \$29.59
Interest payable from February 24 - April 10 = \$3,000 x 0.08 x 47/365 = \$30.90
Total outstanding balance = \$29.59 + \$30.90 + \$2,000 = \$2,060.49

2. On June 1st, a school teacher signed a 2-month note for \$600 at 12% to pay for a vacation. On July 1st, he paid \$300 on the loan, and July 31st, he paid off the loan. What is the total interest he paid on the loan?

\$600 x 0.12 x 2/12 = \$12
3. Charlie Consumer's credit card balance on April 1st was \$40. On April 7th, he made a \$10 payment and on April 25th he charged a \$25 item. If his credit card company charges a finance charge of 2% on the average daily balance, what will be his balance on May 1st when he receives his next statement?

April 7 - 30 = 24 days
\$30 x 24 x 0.02 = \$14.40
May 1 balance = \$30 + \$14.40 + \$25 = \$69.40

4. Ellen Nancy borrowed \$500 at 12% simple interest, to be repaid in 8 equal monthly installments of \$70. If she pays off the loan when she makes her 4th payment, how much will she save in finance charges under the rule of 78s?

The first step is to add up all the digits for the number of payments scheduled to be made. For a 8-installment ...

#### Solution Summary

This solution is comprised of a detailed explanation to compute the amount that Park & Jason, Inc. owe.

\$2.19