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    Lahiru Kosala Bandara Lindamulla
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    © All Rights Reserved
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    11 views5 pages

    Chapter 3 Problems

    Uploaded by

    Lahiru Kosala Bandara Lindamulla

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
    Flag for inappropriate content
    of 5
    86_ CHAPTER 3: INTEREST AND EQUIVALENCE PROBLEMS 28 Whatsum of money now iequivaleatto €8240 wo ears hence, if ineest i 4% pec G-nonth period? 341 In your ova words explain the tne value of money. (Answer: €7052) From your own life (ether now or ina situation that 3:9 The local bank offers to pay 5% interest on savings might occur in your fue), provide an example in deposits. In a nearby town, the bank pays 1.25% per ‘hich the ime value of money would be important month pesiod (quarters). A man who har €3000 3:2 Magdalen, Misia, and Mary Tune were asked to to pot in a savings account wonders whether the consider to different cash flows: C300 tat they inceased intrest paid in the nearby town justifies ‘could receive today and € 1000 that would be received. driving his car there to make the deposit. Assuming 5 yeas rom ony Magdalen wanted the €500 toe bo will leave all money in the account for 2 years Miiam chose to colet ©1000 In 3 yeas an or, tow much additional interest would he obtain fora Jone was indifferent between these two options. Can the out-of-town bank over the local bank? you offer an explanation of the choice made by each 3:40 A sum of money invested at 2% per 6-menth period woman? (Gerienmualy), will double in amoont in approx $3. Awoman borowed €2000 and agreed to repay it at rmatly how many years? Answer: 17M years) the end of3 yeas oper with 10% simple interest. -11 The Apex Company sold a water softene fo Marty er year, How muh il she pay 3 years hence? Smith. The pice of the unit was €350, Mary asked 3-4 A.€5000foan was tobe epsid wth 8% simpleannual fora defered payment plan, and x contact was writ Injereat. tot of €5350 was paid How long was the ter, Under th contact, de bye could delay paying loan ontstanding? forthe water softener if he purchase the cours salt eee for recharging the softener from Apex. Atthe end of fe eee eee ena ean 2 years, the buyer was 1o pay forthe unit ina lamp sum, with interest st rats of 1.5% per quar yeat According tothe contact, ifthe customer eased bay ings from Apex any ime prior 2 year the fal payment due atlicend of2 years would automatically — become due. | a Sixamonths later, Marty decided to buy stelse- 2 ‘where and stopped baying from Apes, whereupon newer: 9 = £136.60) Apex asked forthe fallpayment that was fohave been

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