Reference no: EM132421270

Question 1: Lee is purchasing ski clothing from a supplier for $2,450. The seller offers a 4% discount if the invoice is paid within 10 days; if not paid within 10 days, the full amount must be paid within 30 days of the invoice date (4/10,n/30). Find the Annual Effective Rate. (use 365 days)

Question 2: You are thinking of starting a business after graduation. Being a new business, the banks won't loan you money so you borrow the $20,000 you need from your brother. Your brother decides to do you a favor and charge you simple interest at only 4% APR. You plan to pay him back in three years. How much will you have to pay back in total (maturity value)?

Question 3: The Central Oregon Economic Development council uses its Small Business Financing Program to assist businesses with short-term loans in operating their business. Bill's Cabinets decides to borrow $50,000 for 8 months at 6.2% APR. Bill must make monthly interest-only payments and then repay the loan at the end of the term. What are the monthly interest-only payments? How much is his final payment? (365)

Question 4: You are starting a new bookkeeping and tax business and need $7,500 to set up your new office and print promotional literature. You will be able to pay the loan off after tax season. The terms of the loan are 160 days at 7% APR. What is the interest portion of the payment? What is the maturity value? Answer based on both 365 and 360 days.

Question 5: You are looking at three different loan options to borrow $1000 for one year. The terms are as follows:

Loan A           12% APR payable annually               

Loan B           12% APR payable every six months 

Loan C           12% APR payable monthly               

Which loan has the best terms? Justify your choice.

Question 6: Your 6-month promissory note has a maturity value of $8360. It has principle of $8,000. What is the simple interest APR charged on the note?