Mathematics 1118

Assignment 1 Names:
Numbers:

Show all work and clearly indicate your final answers by circling them. This is a group assignment.

1. (2 Marks) Find the future value (on March 3, 2021) of $2000 invested at r = 3% on February 1, 2020.

2. (2 Marks) Ah Inc. receives an invoice for goods. The terms are 3/20, n /60. If the company were to borrow
money to pay the bill in 20 days, what would be the maximum rate of interest it would be willing to pay on
the loan?

3. (2 Marks) An investor bought a $100,000 face value, 364 day Treasury bill for 96,892.06. What yield rate is
implied?

4. (2 Marks) A bank offers you a loan at a simple discount rate of 8%. What is the equivalent simple interest
rate? Use t = 1 year.

5. (2 Marks) A 90-day promissory note promises to pay Mr. Smith $3000 plus simple interest at 10%. After
61 days, it is sold to a bank that discounts the note at a simple interest rate of 12%. How much money
does Mr. Smith receive?
6. (4 marks) A 182-day promissory note for $1000 with simple interest at 9% is signed on January 12 2018.
After 62 days, it is sold to a finance company that charges a simple discount of 6%.

a. How much does the finance company pay for the note?

b. What is the simple interest rate of return that the finance company earns on its investment if it holds the
note until its maturity?

7. (6 Marks) Jean owes $1000 due in 4 years and $9000 due in 9 years, both due with simple interest at 6%.
What two payments, the first in 2 years and the other in 7 years would pay off both of these debts? The
first payment will be double the size of the second payment. Use 6 years as the focal date. The simple
interest rate is now 3%.