Professional Documents
Culture Documents
1.1
1.2
1.5
ISBN: 9781107654594
The Powers Family Trust 2013
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Example 1
Abbey applied for a flat-rate loan of $40000 at 9% per annum simple interest. She plans to
repay the loan after two years and six months.
a How much interest will be paid?
b What is the total owing at the end of two years and six months?
Solution
1
2
3
4
5
6
7
8
Example 2
I = Prn
= 40000 0.09 2.5
= $9000
Solution
1
2
3
4
5
I = Prn
6300 = P 0.09 3.5
6300
(0.09 3.5)
= $20000
P=
Principal is $20000.
ISBN: 9781107654594
The Powers Family Trust 2013
Photocopying is restricted under law and this material must not be transferred to another party
Example 3
Solution
1
2
3
4
5
6
7
8
ISBN: 9781107654594
The Powers Family Trust 2013
Photocopying is restricted under law and this material must not be transferred to another party
Loan repayments
A loan repayment is the amount of money to be paid at regular intervals over the time period.
The interval is often fortnightly or monthly.
Loan repayments
Loan repayment = Total to be paid Number of repayments
Example 4
Solution
1
2
3
4
5
6
7
9
10
Repayment =
ISBN: 9781107654594
The Powers Family Trust 2013
Photocopying is restricted under law and this material must not be transferred to another party
Exercise 1A
1
Calculate the amount of simple interest for each of the following loans:
a Principal = $25000, Interest rate = 11% p.a., Time period = 4 years.
1
b Principal = $400000, Interest rate = 8 % p.a., Time period = 5 years.
4
c Principal = $560000, Interest rate = 6.75% p.a., Time period = 15 years.
d Principal = $7400, Interest rate = 7% p.a., Time period = 18 months.
e Principal = $80000, Interest rate = 9.25% p.a., Time period = 30 months.
1
Ruby borrows $36000 for 3 years. What is the rate of simple interest if she will owe
2
$8820 in interest?
Chloe has paid $49500 interest on a $220000 loan at a flat interest rate of 10%. What
was the term of the loan?
ISBN: 9781107654594
The Powers Family Trust 2013
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1A
a
b
c
d
e
f
Cell D5 has a formula that calculates the simple interest. Enter this formula.
Fill down the contents of D6 to D8 using the formula for D5.
Cell E5 has a formula that calculates the amount owed. Enter this formula.
Fill down the contents of E6 to E8 using the formula for E5.
Change the interest rate from 8% to 10%.
Change the time period from 20 years to 15 years.
Bailey buys a television for $1800. He pays it off monthly over 2 years at a flat interest
rate of 12.5% per annum.
a How many months will it take Bailey to pay for the television?
b What is the interest charged for the 2 years?
c How much per month will he pay? Give your answer to the nearest cent.
10
11
Jordan decides to buy a car for $23000. He has saved $9000 for the deposit and takes out
a flat-rate loan over 2 years for the balance. The interest charged is 13% per annum.
a What is the balance?
b What is the total amount of interest to be paid?
c What will be his monthly repayment? Answer correct to the nearest cent.
ISBN: 9781107654594
The Powers Family Trust 2013
Photocopying is restricted under law and this material must not be transferred to another party
Development
12
Mia borrowed $400000 at a flat rate of interest of 8.5% per annum. This rate was fixed
for 2 years on the principal. She pays back the interest only over this period.
a How much interest is to be paid over the 2 years?
b After paying the fixed rate of interest for the first year, Mia finds the bank will
decrease the flat interest rate to 7.5% if she pays a charge of $2000. How much will
she save by changing to the lower interest rate for the last year?
13
Fortnightly repayments
Amount
borrowed
1 year
2 years
3 years
$18000
$755
$427
$305
$18500
$783
$429
$307
$19000
$804
$431
$309
14
A truck is advertised at $36000. It can be bought on terms for a 20% deposit and
repayments of $276 per week for 3 years. Assume there are 52 weeks in the year.
a What is the deposit?
b Calculate the total cost of the truck if bought on these terms.
c What is the total interest paid?
d What is the flat interest rate for the loan, correct to one decimal place?
15
16
ISBN: 9781107654594
The Powers Family Trust 2013
Photocopying is restricted under law and this material must not be transferred to another party
Riley has taken out a home loan of $400000. The flat rate of interest is 9% p.a. and the
monthly repayment (R) is $3120. Complete the table below for one month to answer these
questions.
a What interest is owed after one month?
b Determine the value of P + I.
c Determine the value of P + I R.
Months (n)
Principal (P)
Interest (I)
P+I
P+I+R
$400000.00
Solution
1
2
3
4
5
6
I = Prn
= 400000 0.09
1
12
= $3000
Interest owed is $3000.
b
P + I = 400000 + 3000
= $403000
Months (n)
Principal (P)
Interest (I)
P+I
P+IR
$400000.00
$3000
$403000
$399880
ISBN: 9781107654594
The Powers Family Trust 2013
Photocopying is restricted under law and this material must not be transferred to another party
Example 6
What are the missing values in the table of home loan repayments shown below?
Amount borrowed
$150000
7%
$1200
Month (n)
1
Principal (P)
Interest (I)
P+I
P+IR
$150000.00
2
Solution
1
2
3
4
5
First month
I = Prn
= 150 000 0.07
= $875
1
12
P + I = 150000 + 875
= $150875
P + I - R = 150875 - 1200
= $149675
New principal is $149675.
Second month
I = Prn
1
= 149675 0.07
12
= $873.10
P + I = 149675 + 873.10
= $150548.10
P + I R = 150548.10 1200
= $149348.10
Month (n)
Principal (P)
Interest (I)
P+I
P+IR
$150000.00
$875.00
$150875.00
$149675.00
$149675.00
$873.10
$150548.10
$149348.10
ISBN: 9781107654594
The Powers Family Trust 2013
Photocopying is restricted under law and this material must not be transferred to another party
10
Exercise 1B
1
Kayla borrows $170000 for a home at an interest rate of 6% p.a. with a monthly
repayment of $1000.
Months (n) Principal (P) Interest (I)
P+I
P+IR
$170000.00
Answer correct to the nearest cent. Use this approximation in subsequent questions.
a Determine the interest, I, charged for the first month.
b Determine the value of P + I for the first month.
c Determine the value of P + I R for the first month.
d Determine the interest, I, charged for the second month.
e Determine the value of P + I for the second month.
f
Determine the value of P + I R for the second month.
g Determine the interest, I, charged for the third month.
h Determine the value of P + I for the third month.
i
Determine the value of P + I R for the third month.
2
Chris borrowed $250000 at 7.2% p.a. for a unit. The interest is charged monthly and the
monthly repayment is $1650. Complete the following table.
Months (n)
Principal (P)
Interest (I)
P+I
P+IR
$250000.00
$1500.00
$251500.00
$249850.00
$249850.00
$1499.10
$251349.10
$249699.10
3
4
5
Answer correct to the nearest cent. Use this approximation in subsequent questions.
a What is the principal at the beginning of the third month?
b Calculate the interest charged for the third month.
c How much is owed at the end of the third month?
d What is the principal at the beginning of the fourth month?
e Calculate the interest charged for the fourth month.
f
How much is owed at the end of the fourth month?
g What is the principal at the beginning of the fifth month?
h Calculate the interest charged for the fifth month.
i
How much is owed at the end of the fifth month?
ISBN: 9781107654594
The Powers Family Trust 2013
Photocopying is restricted under law and this material must not be transferred to another party
11
Development
3
Complete the table of home loan repayments shown below. Use your calculator answer to
complete each cell of the table, not an approximation. Answer correct to the nearest cent.
Amount borrowed
$300000
7%
$2000
Interest (I)
P+I
P+IR
$300000.00
$1750.00
$301750.00
$299750.00
$299750.00
$1748.54
$301498.54
$299498.54
3
4
5
6
7
8
4
Complete the table of home loan repayments shown below. Use your calculator answer to
complete each cell of the table, not an approximation. Answer correct to the nearest cent.
Amount borrowed
Annual interest rate (r)
Fortnightly repayment (R)
$520000
8%
$1800
Fortnight (n)
Principal (P)
Interest (I)
P+I
P+IR
$520000.00
$1600.00
$521600.00
$519800.00
$519800.00
$1599.38
$521399.38
$519599.38
3
4
5
6
7
8
ISBN: 9781107654594
The Powers Family Trust 2013
Photocopying is restricted under law and this material must not be transferred to another party
12
1B
a
b
c
d
e
Cell B9 has a formula that refers to cell B4 or the amount. Enter this formula.
Cell C9 has a formula that calculates the simple interest. Enter this formula.
Cell D9 has a formula that calculates the amount owing. Enter this formula.
Cell E9 has a formula that calculates the amount owing after a repayment has been
made. Enter this formula.
Fill down the contents of B9:E9 to B13:E13.
Dylan borrowed $240000 for an investment property. The interest rate is 10% p.a. and he
makes monthly repayments of $2300. Construct a table of home loan repayments for the
first two months to answer the following questions.
a How much interest was paid in the first month?
b What is the balance owing after one month?
c How much has the principal been reduced during the first month?
d How much interest was paid in the first two months?
e What is the balance owing after two months?
f
How much has the principal been reduced during the first two months?
Charlotte borrowed $480000 for an inner city apartment. The interest rate is 8% p.a. and
she makes fortnightly repayments of $1600. Construct a table of home loan repayments
for the first three fortnights.
a What is the balance owing after the first fortnight?
b How much interest was paid in the first fortnight?
c How much has the principal been reduced during the first fortnight?
d What is the balance owing after three fortnights?
e How much interest was paid in three fortnights?
f
How much has the principal been reduced during the three fortnights?
ISBN: 9781107654594
The Powers Family Trust 2013
Photocopying is restricted under law and this material must not be transferred to another party
13
PV =
FV
or
(1 + r )n
I = FV - PV
Example 7
a
b
Blake invests $7000 over 5 years at a compound interest rate of 4.5% p.a. Calculate the
future value after 5 years. Answer correct to the nearest cent.
Calculate the present value of an annuity that has a future value of $500000 over 8 years
with an interest rate of 8.5% per annum compounded monthly.
Solution
1
2
3
4
5
6
7
8
9
FV = PV(1 + r)n
= 7000(1 + 0.045)5
= $8723.27
a
FV
(1 + r )n
500000
=
0.085 96
(1 +
)
12
= $253916.41
PV =
ISBN: 9781107654594
The Powers Family Trust 2013
Photocopying is restricted under law and this material must not be transferred to another party
14
Exercise 1C
1
Calculate the future value, to the nearest cent, for each of the following:
a Present value = $400, Compound interest rate = 3% p.a., Time period = 2 years.
1
b Present value = $3000, Compound interest rate = 5 % p.a., Time period = 5 years.
2
1
c Present value = $18000, Compound interest rate = 10% p.a., Time period = 2
2
years.
1
d Present value = $65000, Compound interest rate = 5.9% p.a., Time period = 3
4
years.
Use the formula FV = PV(1 + r)n to calculate the value of an investment of $16000, over
a period of 2 years with an interest rate of 5% compounding annually.
Sophia and Isaac invested $27000 for 6 years at 9% p.a. interest compounding annually.
What is the amount of interest earned in the first year?
Calculate the present value, to the nearest cent, for each of the following:
a Future value = $34000, Interest rate = 4% p.a., Time period = 4 years.
1
b Future value = $200000, Interest rate = 12 % p.a., Time period = 5 years.
4
1
c Future value = $4600, Interest rate = 15% p.a., Time period = 2 years.
2
1
d Future value = $60000, Interest rate = 6.25% p.a., Time period = 1 years.
4
5 Calculate the present value of an investment that has a future value of $5000 after 4 years
and earns 9% p.a. compound interest, paid annually.
ISBN: 9781107654594
The Powers Family Trust 2013
Photocopying is restricted under law and this material must not be transferred to another party
15
Development
6
Calculate the future value, to the nearest cent, for each of the following:
a Present value of $680 invested for 4 years at 5% p.a. compounded biannually.
b Present value of $5000 invested for 6 years at 6% p.a. compounded quarterly.
c Present value of $1400 invested for 3 years at 4.2% p.a. compounded monthly.
d Present value of $780 invested for 5 years at 9.8% p.a. compounded weekly.
e Present value of $290 invested for 7 years at 10% p.a. compounded fortnightly.
Calculate the present value, to the nearest dollar, for each of the following:
a Future value of $1243, interest rate at 6% p.a. compounded biannually for 5 years.
b Future value of $8200, interest rate at 4% p.a. compounded quarterly for 8 years.
c Future value of $1580, interest rate at 4.8% p.a. compounded monthly for 4 years.
d Future value of $19600, interest rate at 8% p.a. compounded weekly for 3 years.
e Future value of $3800, interest rate at 5% p.a. compounded fortnightly for 7 years.
Find the future value of a bank account after 3 years if the present value of $4000 earns
4.6% p.a. interest compounding quarterly.
Alexander invested $16400 over 6 years at 7.4% p.a. interest compounding monthly.
a Calculate the value of the investment after 4 years.
b Calculate the compound interest earned.
10
What sum of money would Max need to invest to accumulate a total of $100000 at the
end of 7 years at 8% p.a. interest compounding biannually? Answer to the nearest cent.
11
What sum of money needs to be invested to accumulate a total of $40000 after 10 years
at 9.25% p.a. interest compounding monthly? Answer to the nearest cent.
12
13
Mikayla invests $200000 for 10 years at 6% p.a. interest compounded quarterly. Abby
also invests $200000 for 10 years, but her interest rate is 6% p.a. compounded monthly.
a Calculate the value of Mikaylas investment at maturity.
b Show that the compounded value of Abbys investment is greater than the value of
Mikaylas investment.
c Explain why Abbys investment is worth more than Mikaylas investment.
ISBN: 9781107654594
The Powers Family Trust 2013
Photocopying is restricted under law and this material must not be transferred to another party
16
Loan 1
Loan Amount :
$150.000
$150.000
Terms (years) :
25
25
Introductory Term
(months) :
Introductory Interest
Rate :
0.00
0.00
6.00
6.00
Establishment Fees :
$0
$0
Monthly Fees :
$10
$0
Annual Fees :
$0
$0
Discharge Fees :
$0
$0
Calculate
Loan 2
Loan 1
Clear Inputs
Loan 2
300
300
$0.00
$0.00
- no. of introductory
payments :
Standard Payment
(monthly) :
$966.45
$966.45
- no. of standard
payments :
300
300
Comparison Rate :
6.11%
6.00%
The above table shows the comparison of two loans that are identical except for a $10 monthly
fee. The comparison rates are 6% and 6.11%.
ISBN: 9781107654594
The Powers Family Trust 2013
Photocopying is restricted under law and this material must not be transferred to another party
17
Calculate the effective annual interest rate of a home loan with an interest rate of 7.25% p.a.
compounded monthly. Give your answer as a percentage correct to two decimal places.
Solution
1
2
3
4
5
E = (1 + r )n 1
12
0.0725
= 1 +
1
12
= 0.07495829742
= 7.50%
Effective interest rate is 7.50%.
Consider a bank loan with an annual interest rate of 12% p.a. The table below shows the
effective annual interest rate if the compounding period is annual, biannual, quarterly or
monthly. When the interest is compounding monthly, quarterly or biannually, the amount of
interest paid is more than if the interest is compounding annually.
Compounding period
Interest rate
Time periods
Annual
12%
12.00%
Biannual
6%
12.36%
Quarterly
3%
12.55%
Monthly
1%
12
12.68%
ISBN: 9781107654594
The Powers Family Trust 2013
Photocopying is restricted under law and this material must not be transferred to another party
18
Exercise 1D
1
a
b
c
d
e
f
2
a
b
c
d
e
f
g
h
ISBN: 9781107654594
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Photocopying is restricted under law and this material must not be transferred to another party
19
Development
3
Use the formula E = (1 + r)n - 1 to calculate the effective annual interest rate. Give your
answer as a percentage correct to two decimal places.
a Interest rate of 6% p.a. compounding biannually.
b Interest rate of 7% p.a. compounding biannually.
c Interest rate of 8% p.a. compounding quarterly.
d Interest rate of 6.4% p.a. compounding quarterly.
e Interest rate of 10% p.a. compounding monthly.
f
Interest rate of 14% p.a. compounding monthly.
g Interest rate of 7.6% p.a. compounding half-yearly.
h Interest rate of 12.36% p.a. compounding half-yearly.
Use the formula E = (1 + r)n - 1 to calculate the effective annual interest rate. Give your
answer as a percentage correct to two decimal places.
a Interest rate of 7.2% p.a. compounding fortnightly.
1
b Interest rate of 7 % p.a. compounding fortnightly.
2
c Interest rate of 4.8% p.a. compounding weekly.
d Interest rate of 9.6% p.a. compounding weekly.
1
e Interest rate of 14 % p.a. compounding daily.
2
f
Interest rate of 10.8% p.a. compounding daily.
ISBN: 9781107654594
The Powers Family Trust 2013
Photocopying is restricted under law and this material must not be transferred to another party
20
A = P(1 + r)n I = A - P
A Amount owing on the credit card
P Principal is the purchases made on the credit card plus the outstanding balance
r Rate of interest per compounding time period expressed as a decimal
n Number of compounding time periods
I Interest (compound) charged for the use of their credit card
Example 9
A = P(1 + r )n
14
0.18
= 280 1 +
365
= 281.9393596
= $281.94
Clothing costs $281.94
ISBN: 9781107654594
The Powers Family Trust 2013
Photocopying is restricted under law and this material must not be transferred to another party
21
CapitalBank
Mr John Citizen
123 Sample Street
Suburbia NSW 2000
Mastercard 0000 1801 0002 1010
Opening balance
$207.72
New charges
$460.14
Payments/refunds
$207.72
50,500
460
15,600
Answer the following questions using the above credit card statement.
a What is the credit card account number?
b What is the opening balance?
c What is the payment due date?
d What is the minimum payment?
e What is the closing balance?
Solution
1
2
3
4
5
a
b
c
d
e
0000180100021010
Opening balance is $207.72.
Payment due date is 30 November.
Minimum payment is $25.00.
Closing balance is $460.14.
ISBN: 9781107654594
The Powers Family Trust 2013
Photocopying is restricted under law and this material must not be transferred to another party
22
Exercise 1E
1
Account Summary
Opening Balance
$743.42
$743.42
Purchases
$172.91
$0.00
Cash Advances
$0.00
$172.91
4,511.88
Payment Summary
$4,684.79
$10.00
Monthly Payment
Due Date
21/04/2012
$10.00
Calculate the amount owed, to the nearest cent, for each of the following credit card
transactions. The credit card has no interest-free period.
a Transactions = $540, Compound interest rate = 14% p.a., Time period = 15 days.
b Transactions = $270, Compound interest rate = 11% p.a., Time period = 9 days.
c Transactions = $1400, Compound interest rate = 18% p.a., Time period = 22 days.
d Transactions = $480, Compound interest rate = 16% p.a., Time period = 18 days.
e Transactions = $680, Compound interest rate = 10% p.a., Time period = 9 days.
Calculate the interest charged for each of the following credit card transactions. The
credit card has no interest-free period. Answer correct to the nearest cent.
a Transactions = $680, Compound interest rate = 15% p.a., Time period = 20 days.
b Transactions = $740, Compound interest rate = 12% p.a., Time period = 13 days.
c Transactions = $1960, Compound interest rate = 17% p.a., Time period = 30 days.
d Transactions = $820, Compound interest rate = 21% p.a., Time period = 35 days.
e Transactions = $1700, Compound interest rate =19% p.a., Time period = 32 days.
ISBN: 9781107654594
The Powers Family Trust 2013
Photocopying is restricted under law and this material must not be transferred to another party
23
Luke has a credit card with a compound interest rate of 19.99% per annum.
a What is the daily percentage interest rate, correct to two decimal places?
b Luke has an outstanding balance of $4890 for a period of 30 days. How much
interest, to the nearest cent, will he be charged?
Andrews credit card charges 0.054% compound interest per day on any outstanding
balances. How much interest is Andrew charged on an amount of $450, which is
outstanding on his credit card for 35 days? Answer correct to the nearest cent.
Olivia received a new credit card with no interest-free period and a daily compound
interest rate of 0.05%. She used her credit card to purchase food for $320 and petrol for
$50 on 18 July. This amount stayed on the credit card for 24 days. What is the total
interest charged? Answer correct to the nearest cent.
Alyssa uses a credit card with a no interest-free period and a compound interest rate of
15.5% p.a. from the purchase date. During April she makes the following transactions.
Transaction details
a
b
c
d
04 April
IGA Supermarket
$85.00
09 April
KMart
$115.00
12 April
David Jones
$340.00
27 April
General Pants
$80.00
28 April
JB-HIFI
$30.00
What is the daily compound interest rate, correct to three decimal places?
Alyssas account is due on 30 April. What is the total amount due?
How much interest has Alyssa paid on the IGA transaction during the month?
Answer correct to the nearest cent.
How much interest has Alyssa paid on the KMart transaction during the month?
Answer correct to the nearest cent.
ISBN: 9781107654594
The Powers Family Trust 2013
Photocopying is restricted under law and this material must not be transferred to another party
24
Development
1.5
10
Charlies credit card has up to 55 days interest free and is due on the 22nd of each month.
The interest rate is 19.4% p.a. compounding daily. Charlie buys furniture costing $5160
on 25 October. How much interest is he charged if he pays the balance on 22 December?
Interest is charged from the date of purchase if the total amount owing has not been paid
by the due date.
11
12
Sarah and Joshua each use their credit cards to buy holiday packages to Adelaide. The
cost of the package is $1700 for each person.
a The charge on Sarahs credit card is 0.9% compound interest per month on the
unpaid balance. It has no interest-free period. Sarah pays $800 after one month and
another $500 the next month. How much does she still owe on her credit card?
b The charge on Joshuas credit card is interest-free in the first month, and 1.4%
compound interest per month on any unpaid balance. Joshua pays $800 after one
month and another $500 the next month. How much does he still owe on his
credit card?
13
Emilys August credit card statement shows an opening balance of $1850, a purchase of
$2450 on 5 August, and another purchase of $55 on 14 August. The minimum payment is
3% of the closing balance. The initial credit charge is 1.6% compounding per month of
any amount outstanding.
a What is the closing balance on this credit card for August?
b Calculate the amount of interest charged for the month of August.
c What is the minimum payment, to the nearest cent, required for August?
d What is the opening balance for October if Emily paid the minimum payment in
September for interest charged in August and made no purchases in September?
ISBN: 9781107654594
The Powers Family Trust 2013
Photocopying is restricted under law and this material must not be transferred to another party
Study guide 1
Flat-rate loans
I = Prn A = P + I
I Interest (simple or flat) earned for the use of money
P Principal is the initial amount of money borrowed
r Rate of simple interest per period expressed as a decimal
n Number of time periods
A Amount of final balance
Comparing loans
Credit cards
FV
or I = FV PV
(1 + r )n
FV Future value of the loan or amount (final balance)
PV Present value of the loan or principal (initial quantity of
money)
rR
ate of interest per compounding time period as a decimal
n Number of compounding time periods
I Interest (compounded) earned
FV = PV(1 + r)n or
PV =
Comparing loans and making the best choice is not simply about
choosing a loan with the lowest interest rate. Borrowers need to
consider flexibility, fees and the comparison rate.
ISBN: 9781107654594
The Powers Family Trust 2013
Photocopying is restricted under law and this material must not be transferred to another party
Review
25
Review
26
What is the interest earned on $1400 at 7% p.a. simple interest for 3 years?
A $98
B $294
C $498
D $1694
David wants to earn $9000 a year in interest. How much must he invest if the simple
interest rate is 15% p.a.? Answer to the nearest dollar.
A $1350
B $10350
C $60000
D $600000
Use the table below to answer questions 3 and 4. The table uses an interest rate of 11% p.a.
with a monthly repayment of $1250.
Months (n)
Principal (P)
Interest (I)
$120000
$1100
P+I
$121100
$121250
$120000
$122200
P+IR
Holly invests $8000 at 10% p.a. interest compounding annually. What is the future value
after 3 years? Answer to the nearest dollar.
A $242
B $2648
C $8242
D $10648
Nathan borrows $3000 at 10% p.a. interest compounding annually. What is the amount
owed after 2 years? Answer to the nearest dollar.
A $3030
B $3060
C $3600
D $3630
What is the future value after 3 years of $6000 invested at 7% p.a. interest compounding
monthly? Answer to the nearest dollar.
A $1350
B $1397
C $7350
D $7398
Calculate the present value of an amount invested for 4 years at an interest rate of 4.5% p.a.
compounded quarterly, if it has a future value of $20000?
A $16722
B $16771
C $19125
D $23920
A credit card has a daily interest rate of 0.05% per day and
no interest-free period. Find the interest charged on $1530
for 14 days. Answer correct to the nearest cent.
A $0.77
B $10.74
C $76.50
D $1540.71
ISBN: 9781107654594
The Powers Family Trust 2013
Photocopying is restricted under law and this material must not be transferred to another party
William takes out a flat-rate loan of $60000 for a period of 5 years, at a simple interest rate
of 12% per annum. Find the amount owing at the end of 5 years.
James borrows $280000 and repays the loan in equal fortnightly repayments of $1250 over
20 years. What is the flat rate of interest per annum on Jamess loan, correct to two decimal
places?
Complete the table of home loan repayments shown below. Use your calculator answer to
complete each cell of the table, not an approximation. Answer correct to the nearest cent.
Amount borrowed
$450000
6.25%
$2450
Month (n)
Principal (P)
Interest (I)
$450000.00
$2343.75
P+IR
2
3
4
ISBN: 9781107654594
The Powers Family Trust 2013
Photocopying is restricted under law and this material must not be transferred to another party
Review
27
Review
28
Julia has been given a home loan of $400000 at 8% p.a. compounded monthly. The loan is
to be repaid in 300 equal monthly instalments of $3087.26.
a Determine the amount to be repaid on this loan.
b How much interest is paid on this loan?
c Using the formula E = (1 + r)n - 1, find the effective interest rate of the loan per annum.
Give your answer as a percentage correct to two decimal places.
Calculate the future value, to the nearest cent, for each of the following:
a Present value = $920, invested for 4 years at 5% p.a. compounded monthly.
b Present value of $2100, invested for 3 years at 6.1% p.a. compounded monthly.
Calculate the present value, to the nearest cent, for each of the following:
a Future value = $26000, Interest rate = 4.9% p.a., Time period = 3 years.
b Future value of $10400, Interest rate at 9% p.a. compounded quarterly for 5 years.
What sum of money would Emma need to invest to accumulate a total of $200000 at the
end of 10 years at 12% p.a. interest compounding biannually? Answer to the nearest cent.
10
11
Benjamin uses a credit card that has no interest-free period and a compound interest rate of
18.5% p.a. from the purchase date. During February he makes the following transactions.
Transaction details
a
b
06 February
Coles
$278.00
07 February
Myer
$87.00
18 February
Big W
$259.00
18 February
Jag
$120.00
20 February
Bunnings
$460.00
What is the daily compound interest rate, correct to three decimal places?
Benjamins account is due on 28 February. What is the interest charged for the
transaction at Bunnings? Answer correct to the nearest cent.
Challenge questions 1
ISBN: 9781107654594
The Powers Family Trust 2013
Photocopying is restricted under law and this material must not be transferred to another party