CHAPTERS 10 AND 11 TEST
Student Name_____________________________ Score_______________________
Chapter 10 Simple Interest
Round all final answers to nearest cent.
1. Woody’s Cafe Real Estate tax of $1,110.85 was due on November 1, 2006. Due to
financial problems, Woody was unable to pay his cafe real estate tax bill until January
15, 2007. The penalty for late payment is 8 1 % ordinary interest. (A) What is the
penalty Woody will have to pay and (B) what will Woody totally pay on January 15?
2. Angel Hall borrowed $82,000 for her granddaughter’s college education. She must
repay the loan at the end of 9 years with 9 % interest. What is the maturity value
Angel must repay?
3. On September 8, Pat Quinn borrowed $9,000 from Queen bank at 10 % interest. Pat
plans to repay the loan on February 17. Assume the loan is on ordinary interest. How
much will Pat repay on February 17?
4. Amy Koy met Pat Quinn (Problem No. 3) at Queen Bank. After talking with Pat, Amy
decided she would like to consider the same loan on exact interest. Calculate the loan
for Amy under this assumption.
% interest. What is
5. Lou Valdez is buying a truck. His monthly interest was $155 at 10
Lou’s principal balance after the beginning of November? Use 360 days. DO NOT
round the denominator in your calculation.
6. Lisa Kane borrowed $8,000 on an 8% 60-day note. After 15 days, Lisa paid $2,000 on
the note. On day 45, Lisa paid $1,000 on the note. What is the total interest and ending
balance due by the U.S. rule? Use ordinary interest.
Structure of Promissory Notes, Simple Discount
Notes, and the Discounting Process
(A) Bank discount; (B) Proceeds for the following simple discount (use ordinary interest);
and (C) the effective interest rate to nearest hundredth percent. (Do not round
denominator in your calculation.
7. $9,000 14% 110 days 7. A. ___________
(face) (dis. rate) (time)
Maturity value for this interest-bearing note using ordinary interest.
8. $42,000 79 days 13% 8. _____________
Complete the following for these interest-bearing notes that are discounted at 11%.
Rate of Maturiy Note Date Note Discount
Principal Interest Time Value Made Discounted Period Proceeds
9. $60,000 14% 60 days A July 5 July 20 B C
10. $90,000 10% 150 days A May 3 June 12 B C
9. A. __________
10. A. _________
11. Given the following, calculate the effective rate (to nearest hundredth percent).
Treasury Bill $10,000
Terms 13 week