Simple Interest: Please Use Exact Interest Note For T 441423

Simple Interest Please Use Exact Interestnote For These Questions Y

Simple Interest Please Use Exact Interestnote For These Questions Y

Simple Interest (please use exact interest) Note: For these questions you need to cite a reliable source for information, which means you cannot use sites like Wikipedia, Ask.com®, and Yahoo® answers. Please, the Assignment problems must have the work shown at all times. The steps for solving the problems must be explained. Assignments must be submitted as a Microsoft Word®. Note: All interest rates are to be assumed to be yearly interest rates.

Please use exact interest. In these questions, you will need to use the date that unit 4 starts for your class. List the date that Unit 4 started for your class: · Unit 4 start date: 08.19.14_________________

Question 1: You decide to take out a simple interest loan for $5000, at 7% yearly interest on the date that unit 4 starts for you. If you repay the loan on December 31st (at the end of the current year):

• a) How much do you pay total when you pay off the loan?
• b) How much interest do you pay?

Question 2: You decide to take out a $20000 simple interest loan at 4%, on the date unit 4 started for you.

• a) In 45 days you decide to pay off $8000 of the loan. What is your new principal? Explain how you got the answer.
• b) 30 days after the first payment, you pay another $6000. What is your new principal? Explain how you got the answer you did.
• c) 45 days after the 2nd payment, your loan comes due. How much do you need to pay then? Explain your reasoning.

Question 3: You need $400 badly, and decide to write a check at a check cashing place to get that money. Assuming you must write the check for $500 to get the $400 in cash, and the check will be cashed in 2 weeks, what simple interest rate did you just pay? Assume 52 weeks in a year for this problem.

Question 4: Same as cash deals are becoming very popular these days. Research a couple of same as cash deals and write an essay explaining the advantages and disadvantages of each. When would one of these deals be a good deal for a person? When would using a same as cash deal be a poor idea?

Paper For Above instruction

Simple interest is a fundamental concept in finance, representing the charge for the use of money calculated on the original principal amount. Unlike compound interest, which accrues on both the initial principal and accumulated interest, simple interest is straightforward, making it easier for consumers and investors to understand the cost of loans or the return on investments. Accurate calculation of simple interest is crucial because it ensures precise financial planning and decision-making, especially when dealing with short-term loans or investments where the interest does not compound over time.

Standard formulas for calculating simple interest involve multiplying the principal amount by the interest rate and the time period, usually expressed in years. The formula is: I = P × r × t, where I is the interest, P is the principal, r is the annual interest rate (expressed as a decimal), and t is the time in years. To determine the total repayment amount, one adds the interest to the original principal, giving total payment = P + I. It is imperative to use the exact interest rate and time period (in precise days converted into years) for accurate computations, as approximate methods may lead to errors that impact financial decisions significantly.

In applying these principles to real-world questions, specific attention must be paid to the exact time periods involved. For instance, when calculating interest over fractional years (such as days), the interest rate is typically divided by the number of days in a year (often 365, or 360 in certain financial contexts). For example, if the interest rate is 7% annually, the daily interest rate is 0.07 / 365. To determine the interest accrued over 45 days, the calculation is I = P × r/day × days. This approach ensures precise interest calculations, critical for short-term loans or partial payments.

Question 1 Analysis: The loan of $5000 at 7% annual interest starting on August 19, 2014, will accrue interest over the period until December 31, 2014. The exact number of days from August 19 to December 31 must be calculated, summing the interest accordingly. The total repayment includes the original principal plus interest; the interest payment is what accumulates over the period. This precise calculation confirms that accurate interest rates and exact days are vital for correct financial assessment.

Question 2 Analysis: The second scenario involves a $20,000 loan at 4% interest. When $8,000 is paid off after 45 days, the principal reduces by that amount, but interest accrual continues on the remaining balance. After a further 30 days, an additional $6,000 payment reduces the principal again. When the loan matures after 45 days from the second payment, the total due includes the remaining principal plus accrued interest, calculated exactly over the respective days, ensuring accurate financial planning.

Question 3 Analysis: The scenario with a $500 check, cashed in two weeks, involves determining the effective simple interest rate paid. Using the interest formula, one can find the rate that turns a $500 check into a $400 cash withdrawal, over the period of 2 weeks, adjusted for weekly interest rate calculations. This example highlights how short-term cash advances often carry high-interest rates when calculated precisely.

Question 4 - Essay: Same-as-cash deals, often offered by retailers, allow consumers to defer payments without interest if paid within the promotional period. These deals are advantageous when the consumer has the financial discipline to pay off within the period, avoiding interest charges. They can facilitate purchasing larger items with manageable payments, providing short-term liquidity convenience. However, disadvantages include the temptation or pressure to delay payments, which can lead to high interest charges if the balance is not paid within the promotional window, as interest often accrues retroactively from purchase date.

Furthermore, some shops may impose hefty fees or hidden costs if the debt isn't paid in time, negating the benefit of the initial appeal. For consumers with tight budgets or poor financial management, these deals might lead to increased debt burdens. They may be advantageous when the consumer uses the deal as a short-term financial bridge without delaying payments and has the discipline to pay within the time frame. Conversely, they are a poor choice for individuals who might forget, face unexpected expenses, or struggle with debt management, potentially leading to higher interest or penalties.

References

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• Damodaran, A. (2010). Applied Corporate Finance. Wiley.
• Investopedia. (2023). Simple Interest. Retrieved from https://www.investopedia.com/terms/s/simpleinterest.asp
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• Krugman, P., & Wells, R. (2018). Economics (5th ed.). Macmillan Learning.
• U.S. Federal Reserve. (2022). Understanding Interest Rates and Inflation. Retrieved from https://www.federalreserve.gov/
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• Government of Canada. (2020). Consumer protection in credit agreements. Retrieved from https://www.canada.ca/en/financial-consumer-agency.html
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