Answer to Question #117586 in Finance for lim

Question

Question 1

Without using finance calculator,

(a) What sum of money will become RM 15,000 in three years at a simple interest rate of 8% per annum?

(b) A certain sum of money is invested now. This investment will be worth RM5500 after fifteen months and RM5800 after twenty-four months. Find the original principal and the simple interest rate that was offered.

(c) A finance company charges a simple interest of 18% per year for short-term loans. If a loan of RM 15,000 was charged RM 337.50, how long was the term of the loan?

Answer 1

a) If the initial investment is x, after three years it will become:

$x*(1+0.08*3)=15000$

Which means that:

$x=\frac{15000}{1+0.08*3}=\frac{15000}{1.24}\approx12096.77$ RM

b) If the initial investment is x and interest rate is r, investment after fifteen and twenty four month will be equial to:

$x*(1+\frac{15}{12}*r)=5500\\\\x*(1+\frac{24}{12}*r)=5800$

Which means that original principal is RM 5 000, offered simple interest rate is 8%.

c) If term of the loan is t years, charged interest will be:

$15000*0.18*t=337.50$

Which means that term of the loan is:

$t=\frac{337.5}{15000*0.18}=0.125$ years or 1.5 month.