Mathematics ct3

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NhoNan28

Mathematics

Description

Question #1 – Simple Interest

Jason needed to borrow $4,000 to pay for plane tickets to Europe. His bank offered him a simple interest loan with an 8% annual interest rate and a 24-month term. Jason does not want to pay any more interest than he must so he checked with his credit union and found they would offer him the same loan amount with 6% simple interest on a 3-year loan. Jason’s loan at both institutions was structured as an installment loan.

  • Calculate the finance charge (interest), the total installment price, and the monthly payment for the bank loan.
  • Calculate the finance charge (interest), the total installment price, and the monthly payment for the credit union loan.
  • Which loan is going cost Jason more in terms of finance charge?
  • Aside from the finance charge consideration, what other factors might influence Jason’s choice of loan?

Question #2 – Effective Annual Yeild
A savings account has a nominal rate of 7%. The interest is compounded daily. Find the account’s effective yield assuming 360 days in a year.

Question #3 – Annuity Payment
David is saving money to open a workout gym. He needs $10,000 in three years to purchase equipment and initiate a building lease. He’s investing his savings in an annuity yielding an annual interest rate of 6.5% compounded monthly. If the annuity requires that David make monthly investments, what annuity payment must Jeremy make to save $10,000?

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Explanation & Answer

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Running Head; Mathematics Ct3

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Mathematics ct3
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Mathematics Ct3

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Mathematics ct3

This paper presents detailed mathematical calculations of some variables that are often
used in financial evaluation and measurement. The simple interest, effective annual yield, and
annuity payment are essential in financial mathematics and are often used for various purposes.
These calculations will be evaluated in detail and explained in relation to the questions.
Simple Interest
Simple interest is a quick method of finding and calculating the interest charges incurred
on a loan. Usually, when a person borrows a certain amount of money over a given period of
time, he/she agrees to repay the amount back along with a fee known as the interest. Similarly,
the simple interest is also applied when a person invests some amount of money in a savings
account. When calculating the simple interest, there are several factors that are considered in the
calculation. The first aspect is the initial amount which is often referred to as the principal
amount. For instance, when a person borrows $2,000, this is known as the principal amount.
Next, the rate at which the interest is calculated is known as the interest rate.
The interests rate is given either as a percentage per year or per month depending on the
nature of the loan or saving. For instance, when one borrows a $2,000 loan at an annual rate of
5%, it implies that the holder will be charged 5% of the $2,000 at the end of the year. For
purposes of the calculation of the simple int...


Anonymous
I was having a hard time with this subject, and this was a great help.

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