CHAPTER 10 SIMPLE INTEREST

INTERNET APPLICATIONS GROUP 1

PROJECT A

Go to http://www.ethanallen.com. Suppose you are moving in 8 months. Find a piece of furniture you would like to purchase when you move. If you find a savings account that pays 3% (annual rate) simple interest for 8 months, then how much would you have to invest today to purchase the furniture in 8 months?

PROJECT B

Go to http://www.consumercity.org/sameascash.html . Read the article "90 Days Same as Cash". Suppose you purchased $5000 worth of furniture and missed the 90-day deadline to pay it off. If you are charged 18% simple annual interest for the 90 days (1/4 year) on the $5000 then how much will you owe?

Solving for Simple Interest and Maturity Value Given: Principal - $5,000.00 Rate: 18% or 0.18 Time: 90/360 Computation: Interest = Principal x Rate x Time Interest = $5,000.00 x 0.18 x 90/360 Interest = $ 225.00 after 90 days Maturity Value = Principal + Interest Maturity Value = $ 5,000 + 225.00 Maturity Value = $ 5,225.00

PROJECT C

Search for a furniture retailer offering a same as cash deal. (See http://www.westminsterteak.com for instance). Select some furniture you would consider buying. Tell the cost of furniture, the length of the same as cash deal and the interest rate you would have to pay if you missed the same as cash deadline. Then estimate how much interest you would owe if you missed the deadline using the same as cash formula.

PROJECT D

Go to http://www.afbank.com/accounts/cd.cfm. Follow the links to rates and find the rate for a 60 month certificate of deposit (CD). Suppose you had invested $30,000 and had to take the money out before maturity. Go back to http://www.afbank.com/accounts/cd.cfm. Find the penalty for early withdrawal on 60 month CD's. Calculate the penalty you would pay for early withdrawal.

Chapter 10 Internet Exercise

Project D Certificate of Deposit

Facts:

For a 60-month term, interest rate is 1.99% Penalty for early withdrawal depends on length of account term; for 60-119 mos. = 365 days loss of interest

Solution: Interest= Principal (P)x Rate(R) x Time (T) I= $30,000x .0199x 5 I= $ 2,985

Chapter 10 Internet Exercise Penalty Interest= Principal (P)x Rate(R) x Time (T) I= $30,000x .0199x 1 I= $ 597 Interest= 5 year interest- 1 year penalty I= $2,985-$597 I= $ 2,388

PROJECT E

Go to http://www.kbb.com/new-cars and choose a new car you would like to purchase. Note the MSRP then go to https://www.chase.com/ and click on auto loans. Input your zip code and click on competitive car loan rates. Assume you are taking the loan out for 60 months. What would the simple interest and the maturity value be on your new car purchase?

2011 BMW X6 xDrive 35i Sport Utility -door

Solving For: Simple Interest & Maturity Value Facts: MSRP(Principal) - $ 57,875 Rate - 2.84% Time - 60 months Computation: Interest = PRT = $57,875 x .0284 x 365/365 = $ 1,643.65/year Interest for 60 months or 5 years = $1,634.65 x 5 years = $8,173.25 Maturity Value = MSRP(Principal) + Interest = $ 57,875 + $ 1,643.65 = $59,518.65 Maturity Value for 60 months or 5 years = $59,518.65 x 5 years = $ 297,593.25