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principal and intrest

Complete the following, using exact interest. (Use table value.) (Use 365 days a year. Do not round intermediate calculations. Round your answers to 2 decimal places. Omit the "$" sign in your response.)

 

Principal Interest Rate Date borrowed Date repaid .......

$655        9%             June 5             Dec. 15

what is the exact time?

what is the interest?

what is the Maturity
value?

 

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3 Answers

Hi Jackie,

Between June 5 and Dec 15, 193 days have elapsed.  I found this number by just plugging the two dates into an excel spreadsheet and then subtracting one from the other.  Try it out!  It's kind of a pain to figure out be hand otherwise.

To calculate the interest, take the amount of time that transpired multiplied by the principal, mulitiplied by the interest rate:

(193/365) * $655 * (0.09) =  $31.17

Note that for a simple interest calculation, we had to divide 193 by 365 to convert days into years.

The maturity value is the principal plus the interest:

655 + 31.17 = $686.17

 

Be careful though, if the interest is compounded, the answer will change.  You might double check to see if the problem says something like "the interest is compounded daily."

 

I hope the answer helps, and especially I hope you can use that trick with Excel!

If you did find it helpful, please upvote my answer :)

Regards,

Comments

Scott, it looks like it should be 193 days, not 183, but otherwise your answer looks good. I checked this using your excel trick, which is actually pretty handy :) I noticed it because I was doing this earlier, and added up the dates by hand to get 194 days (but I included the 15th  which I probably shouldn't have...).

so the interest: (193/365) * 655 * (0.09) = 31.17

and the maturity value: 655 + 31.17 = 686.17

Absolutely right, I had entered June 15th to December 15th by mistake.  Thanks!

hi, mr. scott this jackie from st.louis.... can you please help with matuerity value im lost thanks.... the question has been answers but Im not understanding plz put your input......

Since the principal was paid on Dec 15, the exact # of days is from Jun 5 to Dec 14. Note that there are 30 days in June, 31 days in July, 31 days in Aug, 30 days in Sept, 31 days in Oct, and 30 days in Nov.

So, June 5 to July 4 = 30 days, July 5 to Aug 4 = 31 days, Aug 5 to Sept 4 = 31 days, Sept 5 to Oct 4 = 30 days, Oct 5 to Nov 4 = 31 days, Nov 5 to Dec 4 = 30 days, and Dec 5 to Dec 15 = 10 days.

Thus the exact time in days is:   30+31+31+30+31+30+10 = 193 days

The interest is calculated using the following formula:

   (Principal)*(Interest Rate)*(Time in days/365 days per year)

  = (655)*(0.09)*(193/365) = 31.170821917808 ≈ 31.17

Thus, the interest is $ 31.17 

The Maturity Value = Principal + Interest = 655 + 31.17 = 686.17

Thus, the Maturity Value is $ 686.17

Comments

I think Tamara had the most complete answer. The key is understanding the formula - Interest = Rate x Time. Given any two of these, the unknown can be calculated using simple algebra.