Mathematics for Business I |

Exercises

Simple interest

Directions : Solve the following exercises. Include the process you followed to obtain the result in
each case (data, formula used, substitution of values, result and interpretation)

• Exercise 1 . Alejandra obtained a loan of $70,000.00 for 7 months. How much will you have to pay
for
concept of interest, if they charge you a simple annual rate of 33%?

DATA HOMOGENEOUS DATA FORMULA RESULT

(YEARS)
Capital 70,000
Time 7 Months 0.5833 I=(70,000)(0.33)(0.5833)
I=13,475
Interest I=Cit
33% annual 0.33
rate
The interest is $13,475
Interest x

• Exercise 2. How much should you place in a fixed income investment that pays 20% annually?
so that it generates monthly interest of $5000.
HOMOGENEOUS DATA
DATA FORMULA RESULT
(YEARS)
Capital x
Time 1 Year 1
C=(5000)/(0.20)(1)
Interest I=Cit C=25,000
20% Annual 0.20
rate C=I/it
The capital invested is
Interest 5000
$25,000.00

• Exercise 3 . Calculate the simple annual interest rate at which $65,000.00 was invested if it
generated interest of $7,300.00 in 11 months.

DATA HOMOGENEOUS FORMULA RESULT

DATA (months)
Capital 65,000 I=Cit i=I/Ct i=(7,300)/(65,000)(11) i=0.01020979021
Time 11 Months 11 i=(0.01020979021)(100)=1.02%monthly
Interest x i=(1.02)(12)=12.25%yearly
rate The interest rate is 12.25% annually

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Mathematics for Business I |
Exercises

Interest 7,300

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Mathematics for Business I |
Exercises

• Exercise 4 . Calculate how long it will take to raise $1000,000.00 if $700,000 is deposited in a
Savings account that pays 12% simple annual rate.

DATA HOMOGENEOUS DATA FORMULA RESULT

(years)
Capital 700,000
Time x t=(1,000,000/700,000-
1)/0.12 t=3.5714years
The time is 3 years and
(0.5714)(12)=
Interest 6.8568months
12% Annual 0.12 M=C(1+it) t=(M/C-1)/i
rate The time is 3 years, 6
months and (0.8568)
(30)=25.704 days.

The time is 3 years, 6

Amount 1,000,000
months and 25 days.

• Exercise 5. If a person deposits $50,000 for a fixed term today, how much will he have in a year
and
six months, if the rate is 4% simple quarterly?

DATA HOMOGENEOUS DATA FORMULA RESULT

(quarters)
Capital 50,000
Time 18 Months 6
M=50,000(1+(0.04)(6))
Interest M=62,000
4% Quarterly 0.04 M=C(1+it)
rate
Within 18 months you
Amount x
will have $62,000.00

• Exercise 6. Calculate how much capital an amount of $1200,000.00 will produce if they pay a rate
of
simple annual interest of 14%, for 11 months

DATA HOMOGENEOUS FORMULA RESULT

DATA (MONTHS)
Capital x M=C(1+it) C=1,200,000/(1+(0.01166666667)(11))
Time 11 Months 11 C=M/(1+it) C=1063515.51

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Mathematics for Business I |
Exercises

Interest
14% annual 0.01166666667
rate The capital is $1,063,515.51

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Mathematics for Business I |
Exercises

Amount 1,200,000

• Exercise 7 . Calculate the amount generated by an investment of $170,000.00 with a simple

annual rate of 25% deposited from August 14 to 29 of last year (use exact year).

DATA HOMOGENEOUS FORMULA RESULT

DATA (years)
Capital 170,000
Time 15 days 0.04109589041
M=170,000(1+(0.25)(0.04109589041))
Interest M=C(1+it) M=171,746.5753
25% Annual 0.25
rate
Amount x The amount is $171,746.5753

• Exercise 8. How long does it take for an investment of $65,000 to double its value if the interest
rate is 9% simple per year?

DATA HOMOGENEOUS FORMULA RESULT

DATA (years)
Capital 65,000
Time x t=1/0.09 t=11.1111years
t=(0.1111)(12)=1.3332months
Interest
9% Annual 0.09 t=1/i t=(0.3332)(30)=9days
rate
The time is 11 years, 1 month
Amount -
and 9 days

• Exercise 9. For how long was a capital of $860,000 invested that became $975,000 at a simple
annual rate of 10%?

DATA HOMOGENEOUS DATA FORMULA RESULT

(years)
Capital 860,000
Time x t=(975,000/860,000-
1)/0.10 t=1.337209302
The time is 1 year and
Interest M=C(1+it) t=(M/C- (.3372)(12)=4.0464months
10% Annual 0.10
rate 1)/i The time is 1 year, 4
months and (0.0464)
(30)=1.392 days
The time will be 1 year, 4
Amount 975,000
months and 1 day

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Mathematics for Business I |
Exercises

• Exercise 10 . Banco El Dorado pays an interest rate for savings accounts of 8.75% annually. If last
year Alicia opened a savings account with $71,300 on May 3 and did not make any other movement
until the 29th of the same month that she canceled it. How much money did you receive?

DATA HOMOGENEOUS FORMULA RESULT

DATA (years)
Capital 71,300
Time 26 Days 0.07123287671
M=71,300(1+(0.0875)(0.07123287671))
Interest M=C(1+it) M=71744.40411
8.75% Annual 0.0875
rate
Amount x The amount is $71,744.40411

Answer the following question (maximum 300 words)

Why is simple interest calculation the best option for loans, savings or investments?
In my opinion it is the best option or the best alternative to take out credits, savings or investments,
since after taking out a loan you will know later how much you will end up paying or whether you put
a certain amount of capital in the bank as a savings account and that or This bank manages an
interest rate in favor of the client, it helps you know after how many years your capital will increase
or rather what amount you will have at the end.

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Mathematics for Business I |
Exercises

Document Discount

Directions: Solve the following exercises. Include the process you followed to obtain the result in
each case (data, formula used, substitution of values, result and interpretation)

• Exercise 1. Calculate the commercial discount of a document that was discounted three months
before its maturity, if its face value is $400,000.00 with a discount rate of 15% per year.

DATA HOMOGENEOUS FORMULA RESULT

DATA (years)
Nominal
400,000
value
D=(400,000)(0.15)(0.25)
Time 3 Months 0.25
D=15,000
Discount D=Vn*d*t
15% Annual 0.15
rate
The commercial discount
Discount x
is $15,000.00

• Exercise 2. Calculate the discount for a note with a face value of 90,000 at a discount rate of 12%
per year, if it was discounted 7 months before maturity.

DATA HOMOGENEOUS DATA FORMULA RESULT

(months)
Nominal
90,000
value
D=(90,000)(0.01)(7)
Time 7 Months 7
D=6,300
Discount
12% Annual 0.01 D=Vn*d*t
rate

Discount x The commercial

discount is $6,300.00

• Exercise 3. What is the face value of a note that was discounted 5 months before maturity and
traded at $25,000 if a simple 16% annual discount rate was applied?

DATA HOMOGENEOUS DATA FORMULA RESULT

(months)
Nominal
x
value
D=Vn*d*t Vn=25,000/(0.1333)(5)
Time 5 Months 5
Vn=D/d*t Vn=375,000
Discount
16% Annual 0.1333
rate

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Mathematics for Business I |
Exercises

Face value is
Discount 25,000
$375,000.00

• Exercise 4. What is the face value of a note that was commercially discounted at a discount rate
of 15%, 7 months before maturity and the discount amounted to $1,500?

DATA HOMOGENEOUS DATA FORMULA RESULT

(months)
Nominal
x
value
Vn=1,500/(0.0125)(7)
Time 7 Months 7
D=Vn*d*t Vn=17142.85714
Discount
15% Annual 0.0125 Vn=D/d*t
rate
The face value is
Discount 1,500
$17,142.85714

• Exercise 5. Calculate what commercial discount rate was applied to a document with a face value
of $95,000.00 if it was discounted 30 days before maturity and the discount was $4,830.00

DATA HOMOGENEOUS FORMULA RESULT

DATA (days)
Nominal
95,000
value d=4,830/(95,000)(30)
Time 30 Days 30 d=0.00169473684%daily
D=Vn*d*td=D/Vn*t
Discount d=0.0508%monthly
x
rate
Discount 4,830 d=18.3031%annual

• Exercise 6. Calculate the discount rate that was applied to a document with a face value of
$100,000.00 if it was discounted 40 days before its maturity and the discount was $7,950.00

DATA HOMOGENEOUS FORMULA RESULT

DATA (days)
Nominal
100,000
value d=7,950/(100,000)(40)
Time 40 Days 40 d=0.0019875%daily
D=Vn*d*td=D/Vn*t
Discount x30=0.059625%monthly
x
rate
Discount 7,950 X360=21.465%annual

• Exercise 7. On what date was a document with a face value of $3000.00 discounted, if its
maturity date was September 29, 2018, the discount rate was 45% and the discount was
$112.50?

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Mathematics for Business I |
Exercises

DATA HOMOGENEOUS FORMULA RESULT

DATA (months)
Nominal
3,000
value
Time x
t=112.50/(3000)(0.0375)
Discount rate 45% Annual 0.0375
D=Vn*d*tt= t=1month
Discount 112.50 D/Vn*d
Initial date August 29, 2018
September 29,
The time is 30 days
Due date 2018

• Exercise 8. On what date was a document with a face value of $1250.00 discounted, if its maturity
date was April 27, 2018, the discount rate was 42% and the discount was $32.08?

DATA HOMOGENEOUS FORMULA RESULT

DATA (months)
Nominal
1250
value
Time x
t=32.08/(1250)(0.035)
Discount rate 42% Annual 0.035 t=0.733257 months
t=21.99 days
Discount 32.08 D=Vn*d*tt=D/Vn*d
April 6,
Initial date
2018
April
Due date The time is 21.99 days
27, 2018

• Exercise 9. Calculate the discount on a 120-day note with a face value of $140,000 at a
commercial discount rate of 18% per year.

DATA HOMOGENEOUS FORMULA RESULT

DATA (days)
Nominal
140,000
value
D=(140,000)(0.0005)(120)
Time 120 Days 120 D=Vn*d*t
D=8.4000
Discount
18% Annual 0.0005
rate

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Mathematics for Business I |
Exercises

The commercial discount is

Discount x
$8,400.00

• Exercise 10 . What discount is given to a 120-day note and its face value of $120,000, if it was
discounted 75 days before its maturity with a discount rate of 12% per year?

DATA HOMOGENEOUS FORMULA RESULT

DATA (years)
Nominal
120,000
value
D=(120,000)(0.12)(0.125)
Time 45 Days 0.125
D=1,800
Discount D=Vn*d*t
12% Annual 0.12
rate
The commercial discount
Discount x
is $1,800.00

Answer the following question (maximum 300 words)

Why is interest a discounted value in document discount calculations?
In my way of seeing the question and from what I have practiced in these exercises, I would say that
interest is a discounted value since the discount is the interest reduced from the maturity value at
the time in which either a loan is granted or It is called interest charged for the same, it is a value
discounted to the face value.

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